Boeing said Monday it will temporarily suspend production of its 737 MAX jet in January because it’s unclear when the plane will be recertified for commercial service.
The aircraft maker doesn’t get paid until the planes are delivered to the purchaser and it also must pay to store the aircraft, creating a deepening drag on the company’s finances.
“We believe this decision is least disruptive to maintaining long-term production system and supply chain health,” Boeing said in a statement. “This decision is driven by a number of factors, including the extension of certification into 2020, the uncertainty about the timing and conditions of return to service and global training approvals, and the importance of ensuring that we can prioritize the delivery of stored aircraft. We will continue to assess our progress towards return to service milestones and make determinations about resuming production and deliveries accordingly.”
Boeing said it will seek to limit disruption caused by the temporary half in production.
“During this time, it is our plan that affected employees will continue 737-related work, or be temporarily assigned to other teams in Puget Sound,” the company said. “As we have throughout the 737 MAX grounding, we will keep our customers, employees, and supply chain top of mind as we continue to assess appropriate actions. This will include efforts to sustain the gains in production system and supply chain quality and health made over the last many months.”
Boeing vowed to continue to work with the US Federal Aviation Administration to recertify the plane and safely return it to service.
In April, Boeing cut production of the MAX to 42 planes a month from 52, about a 20 percent reduction. Boeing had hoped to increase production to 57 a month by the end of 2020. Meanwhile, newly completed planes join previously grounded aircraft in storage, further driving up costs.
On Monday, Boeing’s stock fell $14.67 a share, or 4.29 percent, and closed at $327 in NYSE trading. The 52-week range is $292.47 to $446.01 a share.
In an earnings call with investors in July, Boeing said: “Should our estimate of the anticipated return to service change, we might need to consider possible further rate reductions or other options, including a temporary shutdown of the MAX production.”
In October 2018, a MAX jet crashed in Indonesia, and in March 2019, another MAX crashed in Ethiopia. The two crashes killed all 346 passengers and crew onboard. All MAX aircraft have been grounded since March 2019.
Investigators believe the plane’s automated anti-stall device, called the Maneuvering Characteristics Augmentation System (MCAS), erroneously pointed the nose of the planes down to avoid a midair stall and into a fatal plunge.
The FAA has consistently said it has no deadline for the plane’s recertification.
At a hearing last week before the House Transportation Committee, FAA Administrator Steve Dickson, a former US Air Force and commercial pilot, testified, “I’m not going to sign off on this plane until I fly it myself.”
Boeing has about 4,500 MAX jets on order. Some airlines plan to take delivery of new planes as quickly as Boeing can build them after recertification, but others may move slowly.
Boeing had hoped the plane would be cleared to return to service this month, but that proved unrealistic, and it now appears the plane won’t return to the sky until perhaps March at the earliest. The FAA said it plans to check all grounded planes, and the entire US fleet of MAX jets may not return to service until 2021.