WASHINGTON, Dec 17, 2019 (BSS/AFP) – Boeing said Monday it would
temporarily suspend production of its globally grounded 737 MAX jets next
month as safety regulators delay the aircraft’s return to the skies after two
crashes.
The decision confirmed investor fears that the company’s recovery from the
crisis is dragging on longer and creating more uncertainty for Boeing than
executives anticipated.
Boeing’s travails since March have weighed on the US economy, holding down
American manufacturing output, trade and sales of durable goods while
damaging the company’s performance on Wall Street’s benchmark Dow Jones
Industrial Average.
In a statement, the company said it would continue to pay its workers
despite the temporary production stoppage, but the decision immediately
raised questions for the future of parts suppliers that contribute to the
jets’ manufacture.
“We have previously stated that we would continually evaluate our
production plans should the MAX grounding continue longer than we expected,”
the company said in a statement.
“As a result of this ongoing evaluation, we have decided to prioritize the
delivery of stored aircraft and temporarily suspend production on the 737
program beginning next month.”
The company said it would focus on delivering 400 jets it has kept in
storage.
Though the jets have been grounded worldwide since March following deadly
crashes in Indonesia and Ethiopia, which left 346 people dead, Boeing had
continued to produce 40 of the planes per month at a Renton, Washington
facility.
– Shares tumble on Wall Street –
Last week, US aviation regulators issued the company an unusually sharp
rebuke, accusing it of pursuing an “unrealistic” timeline for the MAX’s
return to service and of making public statements intended to put pressure on
federal authorities.
The Federal Aviation Administration said Wednesday it could not approve the
jets’ return to service before 2020, even though Boeing had long said it
planned to get officials’ green light before the end of this year.
Boeing and the FAA have been under intense scrutiny for their responses to
issues with the aircraft, including the flight-handling system involved in
both accidents, the Maneuvering Characteristics Augmentation System, or MCAS.
“Boeing seems to have finally come to terms with the new reality that
international safety regulators will not be bent to their whim, and the
process of returning these planes to service is not as simple as a quick
software fix,” Senator Richard Blumenthal said in a statement.
Analysts say Boeing’s prospects will remain clouded until Boeing can get
the all-clear for the MAX to fly again.
“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,” the company said, adding that it will disclose financial
information tied to the suspension when it releases quarterly results late
next month.
Major air carriers that had purchased 737 MAX jets have repeatedly pushed
back the dates on which they anticipate a return to service.
Southwest said Thursday it had reached a confidential agreement with Boeing
partially compensating the airline for costs related to the grounding of the
jets.
Nevertheless, the manufacturer in November unveiled an updated version of
the jet, the 737 MAX 10.
Shares in Boeing fall 4.3 percent as investors anticipated Monday’s
decision. They were down another 0.4 percent in after-hours trading at 2300
GMT.