Boeing’s building 737 MAX planes with nowhere to go — and it’s going to cost billions per month
Boeing has announced it is pausing deliveries of its 737 MAX aircraft to customers following the grounding of the jetliner around the world, as the world’s largest plane manufacturer responds to its worst crises in years.
- Boeing has paused all deliveries of its 737 MAX jets, but will continue manufacturing them
- Airlines and Boeing are searching for available aircraft parking spaces in response
- A black box has arrived in Paris for analysis from a crashed Ethiopian Airlines 737 MAX 8
The manufacturer said it would continue its production rate of 52 aircraft per month, but its MAX fleet would not be delivered to airlines or leasing companies.
The 737 MAX has been banned from flying in most countries after an Ethiopian Airlines crash this week that killed all 157 people on board was found to have had similar characteristics to the crash of a Lion Air flight in October.
Boeing cited the temporary grounding order by the US Federal Aviation Administration (FAA) as the reason for the pause in delivery.
Though it maintains the planes are safe, Boeing has supported the FAA move.
“We continue to build 737 MAX airplanes while assessing how the situation, including potential capacity constraints, will impact our production system,” Boeing spokesperson Chaz Bickers said.
Another 5,000 MAXs are on order, meaning the financial implications are huge for the industry.
Since the jets were grounded, North American carriers have been wrestling with customer calls and flight cancellations.
Southwest Airlines and American Airlines, the largest US operators of the 737 MAX, said they had started flying empty MAX aircraft to be parked elsewhere during the ban.
And in what may precede a raft of claims, Norwegian Air has said it will seek compensation from Boeing for costs and lost revenue after grounding its fleet of 737 MAX, while Indonesia’s Lion Air has frozen all deliveries of the MAX 8.
Pause will cost Boeing billions
Manufacturers generally avoid halting and then speeding up production, as it disrupts supply chains and can cause industrial snags.
A pause in deliveries while production rates remain unchanged at Boeing’s factory in Renton, Washington, raises the prospect of a new logistical headache: what will the company do when airplanes start cluttering up the tarmac outside the factory?
Industry sources said Boeing was planning to make use of every inch of available space at Renton while exploring other options such as the nearby King County International Airport, unofficially called Boeing Field.
It could also look at Grant County International Airport in central Washington, where Boeing regularly tests aircraft.
Each month of the grounding could cost Boeing between $US1.8 billion and $US2.5 billion in delayed revenue (about $2.5–3.5 billion), according to analyst estimates, although that could be recouped once the ban is lifted and the planes are delivered.
In January, Boeing said it expected to report revenue between $US109.5 billion and $US111.5 billion in 2019.
The company has already been working through supplier delays on engines from CFM International and fuselages from Spirit AeroSystems Holdings that led to dozens of planes being parked outside the Renton factory last summer.
This week, at least three freshly built 737s were parked at or near the factory with yellow weights hanging in the place of engines, signs of lingering issues, according to a person with direct knowledge of the matter.
Moody’s rating agency said the fallout from the crash would not immediately affect Boeing’s credit rating.
Its stock is down about 11 per cent since the crash, wiping more than $US26 billion off its market value. It fell 1 per cent on Thursday.
US President Donald Trump, an aviation enthusiast with deep ties to Boeing, said he hoped the suspensions would be short.
“It’s a great company,” he told reporters at the White House.
“They have to figure it out fast.”
Ethiopian Airlines black box arrives in Paris
France and the US have been present at almost every crash involving Airbus or Boeing aircraft. (AP: Christophe Ena)
Meanwhile, after an apparent tussle over where the investigation should be held, the flight data and cockpit voice recorders from the Ethiopian Airlines 737 MAX 8 that crashed earlier this week have been handed over to France’s Bureau of Enquiry and Analysis for Civil Aviation Safety (BEA).
Under international rules, Ethiopians are leading the investigation but France’s BEA will conduct black box analysis as an adviser.
The US National Transportation Safety Board (NTSB) is also sending three investigators to assist.
Only France and the United States have the experience gleaned from being present at almost every crash involving an Airbus (France) or Boeing (US).
Technical analysis is scheduled to begin on Friday (local time) and the first conclusions could take several days, the BEA said, tweeting a photo of the partly crumpled, orange-cased box.
On Wednesday, new satellite data and evidence from the scene indicated some similarities and “the possibility of a shared cause” with the Lion Air Crash, which Mr Trump cited in his emergency order that suspended all 737 MAXs across the US.
The cause of the Lion Air crash is still being investigated.
A November preliminary report, before the retrieval of the cockpit voice recorder, focused on maintenance and training and the response of a Boeing anti-stall system to a recently replaced sensor, but gave no reason for the crash.