Boe­ing cut­ting pro­duc­tion rate of 737 Max jet

The Tribune (SLO) - - News -

Boe­ing will cut pro­duc­tion of its trou­bled 737 Max air­liner this month, un­der­scor­ing the grow­ing fi­nan­cial risk it faces the longer that its best-sell­ing plane re­mains grounded af­ter two deadly crashes.

The com­pany said Fri­day that start­ing in midApril it will cut pro­duc­tion of the plane to 42 from 52 planes per month so it can fo­cus its at­ten­tion on fix­ing the flight-con­trol soft­ware that has been im­pli­cated in the crashes.

The move was not a com­plete sur­prise. Boe­ing had al­ready sus­pended de­liv­er­ies of the Max last month af­ter reg­u­la­tors around the world grounded the jet.

Pre­lim­i­nary re­ports into ac­ci­dents in In­done­sia and Ethiopia found that faulty sen­sor read­ings er­ro­neously trig­gered an anti-stall sys­tem that pushed the plane’s nose down. Pi­lots of each plane strug­gled in vain to re­gain con­trol over the au­to­mated sys­tem.

In all, 346 peo­ple died in the crashes. Boe­ing faces a grow­ing num­ber of law­suits filed by fam­i­lies of the vic­tims.

Boe­ing also an­nounced it is cre­at­ing a spe­cial board com­mit­tee to re­view air­plane de­sign and de­vel­op­ment.

The an­nounce­ment to cut pro­duc­tion comes af­ter Boe­ing ac­knowl­edged that a sec­ond soft­ware is­sue has emerged that needs fix­ing on the Max – a dis­cov­ery that ex­plained why the air­craft maker had pushed back its am­bi­tious sched­ule for get­ting the planes back in the air.

A Boe­ing spokesman called it a “rel­a­tively mi­nor is­sue” and said the plane maker al­ready has a fix in the works. He said the lat­est is­sue is not part of flight-con­trol soft­ware called MCAS that Boe­ing has been work­ing to up­grade since the first crash.

Chair­man and CEO Den­nis Muilen­burg de­scribed the pro­duc­tion cut as tem­po­rary and a re­sponse to the sus­pen­sion of Max de­liv­er­ies.

Boe­ing has de­liv­ered fewer than 400 Max jets but has a back­log of more than 4,600 un­filled or­ders. The Chicago-based com­pany had hoped to ex­pand Max pro­duc­tion this year to 57 planes a month.

In­done­sia’s Garuda Air­lines has said it will can­cel an or­der for 49 Max jets. Other air­lines, in­clud­ing Lion Air, whose Max 8 crashed off the coast of In­done­sia on Oct. 29, have raised the pos­si­bil­ity of can­cel­ing.

A Boe­ing of­fi­cial said Fri­day’s an­nounce­ment about cut­ting pro­duc­tion was not due to po­ten­tial can­cel­la­tions. The of­fi­cial spoke on con­di­tion of anonymity be­cause Boe­ing does not pub­licly dis­cuss those de­tails.

In a state­ment, Muilen­burg said the re­duc­tion was de­signed to keep a healthy pro­duc­tion sys­tem and main­tain cur­rent em­ploy­ment – in ef­fect, slow­ing down pro­duc­tion now to avoid a deeper cut later, if fix­ing the plane takes longer than ex­pected.

An­a­lysts say the ab­sence of de­liv­er­ies will eat into Boe­ing’s cash flow be­cause it gets most of the cost of a plane upon de­liv­ery.

Boe­ing de­clined to pro­vide fig­ures, but un­de­liv­ered Max jets have been stack­ing up at its Ren­ton, Wash­ing­ton, assem­bly plant.

Air­lines that op­er­ate the Max will be squeezed the longer the planes are grounded, par­tic­u­larly if the in­ter­rup­tion ex­tends into the peak sum­mer travel sea­son.

They could buy used 737s, but that would be costly be­cause the com­pa­ra­bly sized Boe­ing 737800 was very pop­u­lar and in short sup­ply even be­fore the Max prob­lems, ac­cord­ing to Jim Wil­liams, pub­lisher of Air­fax, a news­let­ter that tracks trans­ac­tions in­volv­ing com­mer­cial air­craft.

Wil­liams said that if the Max ground­ing ap­pears likely to ex­tend into sum­mer it will cause air­lines to ex­plore short-term leases, which could push lease rates higher, some­thing that air­line an­a­lysts say is al­ready hap­pen­ing.

Boe­ing shares closed at $391.93, down $3.93. In af­ter-hours af­ter news of the pro­duc­tion cut, they slipped an­other $8.98, or 2.3%, to $382.85.

TED S. WAR­REN AP file

A Boe­ing 737 MAX 8 air­plane sits on the assem­bly line dur­ing a brief me­dia tour in Boe­ing’s 737 assem­bly fa­cil­ity in Ren­ton, Wash., March 27. Boe­ing said it is cut­ting pro­duc­tion of its grounded Max air­liner this month to fo­cus on fix­ing flight-con­trol soft­ware.

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