Ripples from Boeing’s 737 Max quagmire begin to spread

Boeing is suspending production of the 737 Max as hopes of getting its marquee aircraft back in the air quickly fade.

The ramifications are likely to ripple beyond the factory floor of Boeing’s plant in Renton, Washington, across both the aviation and manufacturing sectors. It could ultimately alter the country’s trade balance.

Southwest Airlines, which had been relying on the Boeing aircraft to update its fleet, pushed back any hope of reinserting the Max into its line-up by five weeks, to April. American Airlines did the same last week.

Southwest said Tuesday that it is trying to minimise travel disruptions and apologised to customers for any impact they might suffer.

Shares of major manufacturers that supply Boeing with critical elements of the 737 Max fell in early trading Tuesday, demonstrating the wide reach of Boeing’s announcement. Spirit AeroSystems was down 1.5 per cent, while General Electric was off slightly. Meanwhile, shares of Boeing’s main rival, Airbus, were up about 1.8 per cent.

Boeing announced Monday that it will suspend production of the Max, starting sometime in January, with no specific date for when the Renton plant will be restarted.

The company said it won’t lay off any of the factory’s 12,000 workers “at this time,” and many could be diverted to plants elsewhere in the Seattle region. Some could also be assigned to work on the 400 jets that Boeing has built since the Max was grounded in March but couldn’t be delivered.

Boeing’s decision is a recognition that it will take longer than the company expected to get the planes back in the air.

“If they had gotten some information quietly, behind the scenes, from the FAA that things were looking good for January or February, they wouldn’t have done this,” said Richard Aboulafia, an aircraft industry analyst at the Teal Group.

The Max is Boeing’s most important jet, but it has been grounded since March after crashes in Indonesia and Ethiopia that killed a total of 346 people.

The Federal Aviation Authority, FAA, told the company last week that it had unrealistic expectations for getting the plane back into service. Boeing has missed several estimates for the plane’s return date.

The agency has not given a specific date for approving the Max’s return, but FAA Administrator Stephen Dickson has said it will be done on the agency’s timetable, not Boeing’s.

The FAA said Monday it wouldn’t comment on Boeing’s business decisions, and that it has no set time frame for when work to recertify the Max to fly will be completed.

Even if no employees are laid off, ceasing production still will cut into the nation’s economic output because of Boeing’s huge footprint in the US manufacturing sector. Through October of this year, the US aerospace industry’s factory output has fallen 17 per cent compared with the same period last year, to $106.4 billion, in part due to previous 737 Max production cuts.

Aboulafia said the shutdown would probably hinder the economy in the coming months and could worsen the nation’s trade balance. “This is the country’s biggest single manufactured export product,” he said.

Boeing said it will determine later when production can resume, based largely on approval from government regulators.

“We believe this decision is least disruptive to maintaining long-term production system and supply chain health,” the company said.

Investigators have found that flight-control software designed to stop an aerodynamic stall was a major factor in the crashes, and Boeing is updating the software, making it less aggressive. But regulators have yet to approve the changes.

The long-term grounding has put Boeing in a difficult position, said Joe Schwieterman, a DePaul University professor who is an aviation expert. The plant shutdown will help Boeing conserve cash, but it also will disrupt the network of about 900 companies that supply parts for the Max and other 737 models, Schwieterman said.

AP