Boeing had hoped that 2024 would be the year it would significantly increase production of its popular Max jet. But less than a month into the year, the company is struggling to reassure airline customers that it will still be able to deliver on its promises.
That’s because the Federal Aviation Administration said Wednesday it would limit the plane maker’s production until it is confident in Boeing’s quality control practices. On January 5, a panel blew off the body of a Boeing 737 Max 9 shortly after takeoff, terrifying passengers on an Alaska Airlines flight and forcing pilots to make an emergency landing at Oregon’s Portland International Airport. Almost immediately, the FAA grounded some Max 9s.
Since then, details have emerged about the jet’s production at Boeing’s facility in Renton, Washington, prompting scrutiny of the company’s quality control. Boeing workers opened and reinstalled the panel about a month before the plane was delivered to Alaska Airlines.
The directive is another blow to Boeing, which was planning to increase production of its MAX aircraft series to more than 500 this year from about 400 last year. It also planned to add another assembly line at a factory in Everett, Washington, a major Boeing production center north of Seattle.
As part of the FAA’s announcement Wednesday, it also approved inspection and maintenance procedures for the Max 9. Airlines can return the jet to service after following those instructions. United Airlines said Thursday it could resume flying some of those planes by Friday.
The move is another potential blow to airlines. Even though the demand for flights has increased rapidly after the lockdown and travel restrictions imposed due to the pandemic were eased, airlines have not been able to take full advantage of that demand. Companies are not able to purchase enough aircraft or hire enough pilots, flight attendants and other staff to operate flights. A rise in the price of jet fuel following Russia’s invasion of Ukraine also hurt profits.
Many airline executives are now assessing how the FAA’s order will affect their fleet plans for the next decade or more.
When they are introduced, the narrow-body, fuel-efficient planes will help the manufacturer compete with Airbus, which has far outstripped Boeing in sales. But the Max series has been plagued by mechanical and safety issues, including two crashes in 2018 and 2019 that killed about 350 people and grounded the Max 8 for nearly two years.
In its Wednesday announcement, the FAA did not say how soon it would lift the pause on production growth, but it did give Boeing a set of conditions it must meet before doing so. It added that “it will not be a return to business as usual for Boeing.”
Agency Administrator Mike Whitaker said, “We will not agree to any request from Boeing to expand production or approve additional production lines for the 737 Max until we are satisfied that during the process The quality control issues that arose have been resolved.”
Boeing’s share price fell nearly 6 percent on Thursday and is down nearly 19 percent since Jan. 5.
In 2023, Boeing will produce an average of about 32 of its 737 planes per month, with plans to increase that to 38 by the end of last year. The goal was to increase production to 42 per month in 2024, an increase of more than 100 aircraft year-on-year, and to about 50 per month in 2025. Before the Max 8 was discontinued in 2019, Boeing was in production. 52 Max Jets per month.
Several airlines said they welcomed the FAA’s decision to pause Boeing production until regulators are confident the company has improved quality and addressed safety concerns. But some airline executives rapidly changed their fleet plans, recognizing that the planes they were expecting would now arrive months or, in some cases, years later than they expected.
Alaska Airlines, which has a fleet of 231 Boeing 737 airplanes, was set to add 23 Max jets to its fleet in 2024, but said Thursday it expects “many of them will be delayed.”
“We have the right number of aircraft to fly on 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 implications of the FAA’s recently announced limits on aircraft production at Boeing.”
Southwest Airlines, which was waiting on more than 500 MAX jets as of October, said it would “reduce the number of Boeing 737 MAX aircraft deliveries” as it expected from the manufacturer and will no longer sell any MAX 7 jets. Hopefully not, which the FAA hasn’t done. Now certified, in 2024.
Still, some analysts said it was unclear how much impact the FAA order would have.
“It’s possible that the FAA’s ban on the ramp is irrelevant — at least to the move toward 42 — as investors are already long on 38 for stability and increased quality,” Deutsche Bank analysts said in a research. Have started believing.” Thursday’s note referred to the number of 737 Max planes Boeing will build in a month.
At least one airline was confident that the disruptions would not affect its orders from Boeing. European low-cost airline Ryanair said in a statement that the manufacturer had “assured Ryanair that the grounding of the Max 9s and carrying out maintenance rather than increasing current monthly production will result in further delays to Ryanair’s deliveries for summer 2024 and summer 2025.” It won’t happen.”
While the FAA’s decision to limit production doesn’t help, Boeing was struggling to increase production for another reason as well — it and its suppliers haven’t been able to replace all the workers they laid off during the pandemic. Was gone, retired or left. It has become harder to find new skilled workers and it is taking longer to train them, said Christopher Ryte, senior analyst at Third Bridge, a research firm. “There is no labor base.”
Boeing has two models of Max planes in production, the Max 8 and Max 9, and two other versions, the Max 7 and Max 10, which are awaiting approval from the FAA before any flights.
Even before the January 5 incident at the Alaska Airlines Max 9, airlines were limited in how much they could grow by adding flights or routes. In April, Willie Walsh, chairman of the International Air Transport Authority, said capacity would remain short until 2025 and possibly longer.
Jonathan Handschu, an airline analyst at CFRA Research, said Boeing’s safety and production struggles could worsen an uncertain situation for airlines.
Delays in delivery of new planes will mean airlines will spend more than they expected on fuel because they will be forced to use older, less fuel-efficient planes that they expect to scrap or sell, Mr. Handshoe said. Was done. In addition to increasing supply-chain issues, Mr. Handshoe said, the new labor agreements give pilots, flight attendants, mechanics and other workers big pay raises.
In recent weeks, some airline chiefs have taken the unusual step of publicly chastising Boeing for safety failures and production delays. Aviation analyst Hubert Horan said airlines were trying to get a better deal from Boeing on larger orders already placed.
“Such contracts typically have large penalties and cancellation provisions if major problems prevent Boeing from fulfilling the contract,” Mr. Horan said. “To some extent, recent public statements are part of the conversation about the final terms of the penalty and remission.”
On a call with analysts Thursday, Alaska’s chief executive, Ben Minicucci, said the company’s partnership with Boeing was an important part of the carrier’s future. The company had 185 Max aircraft on order, and Mr. Minicucci noted that he was happy with the Max until the latest incident.
But the week-long grounding of Max 9 planes and limits on Boeing production will hurt companies like Alaska. The company said it expects the FAA grounding alone to cost it $150 million — although it also expects to “fully recoup” that loss — and Mr. Minicucci said in a recent interview that he He was angry at Boeing for its safety and production failures.
“We will hold Boeing’s feet to the fire to make sure we get good airplanes out of that factory,” Mr. Minicucci said.