Boeing hoped that 2024 would significantly increase production of its popular Max jets. But less than a month into the year, the company is struggling to reassure airline customers that it can continue to deliver on its promises.
That’s because the Federal Aviation Administration said Wednesday that it would limit the plane maker’s production until Boeing had confidence in its quality control practices. On Jan. 5, a panel blew off the fuselage of a Boeing 737 Max 9 shortly after takeoff, terrifying passengers on an Alaska Airlines flight and forcing the pilots to make an emergency landing at Portland International Airport in Oregon. Almost immediately, the FAA grounded some Max 9s.
Since then, details have emerged about the jet’s production at Boeing’s plant in Renton, Washington, which has brought increased scrutiny to the company’s quality control. Boeing employees opened the panel and then reinstalled it about a month before the plane was delivered to Alaska Airlines.
The directive is another setback for Boeing, which had planned to increase production of its Max series of planes to more than 500 this year from around 400 last year. It also planned to add another assembly line at a factory in Everett, Washington, a major Boeing manufacturing center north of Seattle.
As part of Wednesday’s announcement, the FAA also approved inspection and maintenance procedures for the Max 9. Airlines can return the jets to service once they follow those instructions. United Airlines said Thursday that some of those planes could begin flying again as early as Friday.
The move is another potential blow to airlines. Even though demand for flights rose sharply following the pandemic lockdowns and the easing of travel restrictions, airlines were unable to take full advantage of this demand. Companies have been unable to buy enough planes or hire enough pilots, flight attendants and other workers they need to operate flights. A rise in fuel costs following Russia’s invasion of Ukraine also weighed on profits.
Many airline executives are currently assessing how the FAA order would affect plans for their fleets for the next decade – or longer.
When introduced, the narrow-body, fuel-efficient planes should help the manufacturer compete with Airbus, which is well ahead of Boeing in sales. However, the Max series has been plagued by mechanical and safety issues, including two accidents in 2018 and 2019 that killed nearly 350 people and resulted in the Max 8 being grounded for nearly two years.
In its announcement Wednesday, the FAA did not say how quickly it would lift the pause on production increases, but gave Boeing conditions it must meet before doing so. It said there will be “no return to normal for Boeing.”
“We will not approve any request from Boeing to expand production or authorize additional production lines for the 737 Max until we are satisfied that the quality control issues uncovered during this process are resolved,” said Mike Whitaker, the agency’s administrator.
Boeing’s stock price fell about 6 percent on Thursday and has fallen about 19 percent since January 5.
In 2023, Boeing averaged about 32 of its 737 planes per month and plans to increase to 38 by the end of last year. The goal was to further increase production to 42 per month in 2024, an increase of more than 100 aircraft compared to the previous year, and to about 50 per month in 2025. Before the Max 8 was discontinued in 2019, Boeing had been producing 52 Max jets per month.
Many airlines said they welcomed the FAA’s decision to cut Boeing’s production until regulators were satisfied the company had improved quality and addressed safety concerns. But some airline executives also moved quickly to recalibrate their fleet plans, assuming that the planes they expected would now arrive months or, in some cases, years later than expected.
Alaska Airlines, which has a fleet of 231 Boeing 737 planes, was scheduled to add 23 Max jets to its fleet in 2024, but said Thursday that it expects “many of them to be delayed.”
“We have the right number of aircraft to meet our current schedule and get our guests where they want to go,” the company said in a statement. “We are still working to understand the impact of the FAA’s recently announced curtailment of aircraft production at Boeing.”
Southwest Airlines, which was waiting for more than 500 Max jets in October, said it would “reduce the number of Boeing 737 Max aircraft deliveries expected by the manufacturer” and no longer expects Max 7 jets, something the FAA has not done yet certified, in 2024.
Still, some analysts said it wasn’t clear what impact the FAA’s order would have.
“It’s possible that the FAA’s restriction is irrelevant to the rise – at least for the transition to 42 – as investors had already begun to expect a longer timeframe at 38 to drive stability and higher quality,” analysts said Deutsche Bank said in a study note Thursday that it refers to the number of 737 Max planes Boeing makes in a month.
At least one airline was confident the disruptions would not affect its orders from Boeing. Ryanair, the European budget airline, said in a statement that the manufacturer “has assured Ryanair that grounding the Max 9 and maintaining rather than increasing current monthly production will not further delay Ryanair deliveries for summer 2024 and summer 2025.” “.
While the FAA’s decision to limit production doesn’t help, Boeing has also had difficulty increasing production for another reason – the company and its suppliers have been unable to replace all of the workers laid off during the pandemic retired or were terminated. It’s difficult to find new skilled workers and takes longer to train them, said Christopher Raite, senior analyst at Third Bridge, a research firm. “The labor base just isn’t there.”
Boeing has two models of Max aircraft in production, the Max 8 and Max 9, as well as two other versions, the Max 7 and Max 10, that are awaiting FAA approval before they can be flown.
Even before the Alaska Airlines Max 9 incident on Jan. 5, airlines’ ability to grow by adding flights or routes was limited. In April, International Aviation Administration President Willie Walsh said capacity would remain constrained until 2025 and possibly longer.
Jonnathan Handshoe, airline analyst at CFRA Research, said Boeing’s safety and production problems could worsen airlines’ precarious situation.
Delays in new plane deliveries, Mr. Handshoe said, would mean airlines would spend more on fuel than they had expected because they would be forced to use older, less fuel-efficient planes that they had intended to scrap or sell. In addition to increasing supply chain problems, Mr. Handshoe said, new collective bargaining agreements are giving pilots, flight attendants, mechanics and other workers big raises.
In recent weeks, some airline bosses have taken the unusual step of publicly rebuking Boeing for its safety lapses and production delays. Hubert Horan, an aviation analyst, said airlines were trying to get a better deal from Boeing on large orders they had already placed.
“Contracts like these typically provide for large penalties and cancellations if major problems prevent Boeing from fulfilling the contract,” Horan said. “In part, the recent public statements are part of the negotiations on the final terms of penalties and rebates.”
In a call with analysts Thursday, Alaska CEO Ben Minicucci said the company’s partnership with Boeing is an important part of the airline’s future. The company had ordered 185 Max aircraft, and Mr. Minicucci noted that it had been happy with the Max until the latest incident.
But the weeks-long grounding of Max 9 aircraft and restrictions on Boeing production will hurt companies like Alaska. The company said it expected the FAA’s grounding alone to cost $150 million – although it also expected to be “recouped” for that loss – and Mr. Minicucci had said in a recent interview that it was because of safety and safety of Boeing is upset about production losses.
“We will put Boeing to the test to make sure we get good airplanes from this factory,” Minicucci said.
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2024-01-26 00:05:31
www.nytimes.com
