Boeing says 737 Max won’t be cleared to fly until mid-2020

Six-month delay will add to the company’s financial burden

 Boeing 737 Max aircraft  parked outside the company’s production facility in Renton, Washington, last week. Photograph: Lindsey Wasson/Reuters

Boeing 737 Max aircraft parked outside the company’s production facility in Renton, Washington, last week. Photograph: Lindsey Wasson/Reuters

 

Boeing Co said its grounded 737 Max won’t be cleared to fly until the middle of this year, at least six months later than previously anticipated, adding to the company’s financial burden.

The US planemaker is resetting expectations as it addresses two recent setbacks for the embattled Max: a software flaw that will require more work than expected and an audit that found some wiring on the aircraft needs to be shifted. The final determination on when the Max will fly again remains in the hands of US regulators, Boeing said in a statement on Tuesday.

The worsening timeline deepens the challenge for Boeing as new chief executive officer David Calhoun tries to repair frayed relationships with customers, suppliers and regulators. His predecessor, Dennis Muilenburg, was ousted in December as it became apparent that the company would miss its goal of recertifying the Max in 2019. The jet was grounded in March after the second of two deadly accidents that killed a total of 346 people.

The new delay will “reduce deliveries and increase Boeing’s reimbursements to airlines, which we believe will easily top $10 billion,” Bloomberg Intelligence analyst George Ferguson said in a report. “Boeing will have to pay airlines for lost profit and the increased cost of training if simulator work is needed, as the airframer recommends.”

Slower recovery

Every month the grounding drags on means a slower recovery for Boeing, which has halted production of the Max. More delays also signify growing costs to store about 800 of the single-aisle workhorses. Boeing has borrowed $21.5bn (€19.4bn) since the first Max fell from the sky in October 2018, and is seeking to add another $10 billion in new loans.

The shares dropped 3.3 per cent to $313.37 at the close in New York, the biggest decline on the Dow Jones Industrial Average and the lowest closing price in more than a year.

The latest estimate “is subject to our ongoing attempts to address known schedule risks and further developments that may arise in connection with the certification process,” Boeing said. “Returning the Max safely to service is our number one priority, and we are confident that will happen.”

The Federal Aviation Administration (FAA) said it has not set a time frame for completing work on the Max, which was expected to be Boeing’s largest source of profit when it debuted in 2017.

“We continue to work with other safety regulators to review Boeing’s work as the company conducts the required safety assessments and addresses all issues that arise during testing,” the FAA said in a statement.

If the Max does indeed return in the middle of 2020, Boeing’s best-selling jet will miss some or all of the busy summer travel season for the second straight year, compounding the pain for airlines. The three largest US Max operators have already taken the aircraft out of their schedules through June.

“We will continue to assess any future schedule revisions on a rolling 30-day basis and make any potential adjustments accordingly,” said Brandy King, a spokeswoman for Southwest Airlines Co. The carrier, the biggest Max operator, has pulled the model from its schedules until June 6th, resulting in as many as 330 weekday flight cancellations. Calhoun, a former senior executive at General Electric Co. and Blackstone Group Inc., stepped into the top job at Boeing on January 13th, emphasizing transparency and streamlined decision-making. His plans for turning around the company will be in the spotlight when Boeing reports fourth-quarter earnings on January 29th. – Bloomberg