Boeing expected 2024 to be the year it significantly increased production of its popular Max jets. 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.
Indeed, the Federal Aviation Administration said Wednesday it would limit the planemaker’s production until it has confidence 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 the international airport. from Portland, Oregon. Almost immediately, the FAA grounded some Max 9s.
Since then, details have emerged about the plane’s production at Boeing’s Renton, Washington, facility, intensifying scrutiny of the company’s quality control. Boeing workers opened and then reinstalled the panel about a month before the plane was delivered to Alaska Airlines.
The directive is a new setback for Boeing, which planned to increase production of its Max series of planes to more than 500 this year, up from around 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 planes to service once they follow these instructions. United Airlines said Thursday it could resume flights on some of those plans as early as Friday.
The move represents a potential new blow for airlines. Even though demand for flights has returned with a vengeance following pandemic lockdowns and easing of travel restrictions, airlines have not been able to fully capitalize on this demand. Companies have not been able to buy enough planes or hire enough pilots, flight attendants and other workers they need to operate their flights. Rising jet fuel prices after Russia’s invasion of Ukraine also hurt profits.
Many airline executives are currently evaluating the impact of the FAA order on their fleet plans for the next decade or more.
When introduced, the narrow-body, fuel-efficient designs were supposed to help the manufacturing industry compete with Airbus, which has outpaced Boeing in sales. But the Max series has been plagued by mechanical and safety issues, including two accidents in 2018 and 2019 that killed nearly 350 people and led to the Max 8 being grounded for nearly two years.
In its Wednesday announcement, the FAA did not specify how quickly it would lift the pause on increasing production, but instead set conditions for Boeing to meet before doing so. He said “this will not be business as usual for Boeing.”
“We will not accept any requests from Boeing for production expansion or approve additional production lines for the 737 Max until we are satisfied that the quality control issues discovered during this process are resolved.” , said Mike Whitaker, the agency’s administrator.
Boeing’s stock price fell about 6% on Thursday and about 19% since January 5.
In 2023, Boeing produced an average of about 32 of its 737 plans per month, with plans to increase to 38 by the end of last year. The goal was to further increase production to 42 per month in 2024, a year-over-year increase of more than 100 shots, and to around 50 per month in 2025. Before the Max 8 was grounded in 2019, Boeing produced 52 Max jets per month.
Many airlines said they welcomed the FAA’s decision to keep Boeing’s production under control until regulators were satisfied the company had improved quality and resolved safety issues. But some airline executives also quickly reorganized their fleet plans on the assumption that the plans they had been waiting for would now arrive months, or in some cases, years later than expected.
Alaska Airlines, which has a fleet of 231 Boeing 737s, was scheduled to add 23 Max jets to its fleet in 2024, but said Thursday it expected “many of them to be delayed.”
“We have the adequate number of aircraft to meet our current schedule and get our customers 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 limitation on aircraft production at Boeing.”
Southwest Airlines, which was expecting more than 500 Max jets in October, said it would “reduce the number of Boeing 737 Max aircraft deliveries” it expected from the manufacturer and that it was no longer expecting Max 7 planes. , which the FAA did not do. still certified, in 2024.
However, some analysts said it was unclear what impact the FAA order would have.
“It is possible that the restrictions imposed by the FAA on the ramp are not relevant – at least for the transition to 42 years – since investors had already begun to consider a longer deadline at 38 years to promote stability and a quality increased,” Deutsche Bank analysts said in a study. note Thursday, referring to the number of 737 Max projects Boeing completes in a month.
At least one airline was confident that the disruptions would not harm its orders with Boeing. Ryanair, the European low-cost airline, said in a statement that the manufacturer had “assured Ryanair that grounding the Max 9s and maintaining rather than increasing the current monthly production would not further delay deliveries of Ryanair” for summer 2024 and summer 2025.
While the FAA’s decision to limit production doesn’t help, Boeing has also struggled to increase production for another reason: It and its suppliers have not been able to replace all the workers who have been laid off, retired or resigned during the pandemic. It has been difficult to find new skilled workers and training them takes longer, said Christopher Raite, principal analyst at Third Bridge, a research firm. “The labor base just isn’t there.”
Boeing has two Max models in production, the Max 8 and Max 9, as well as two other versions, the Max 7 and Max 10, which are awaiting FAA approval before they can fly.
Even before the Jan. 5 incident on the Alaska Airlines Max 9, airlines were limited in their ability to grow by adding flights or routes. In April, International Air Transport Authority Chairman Willie Walsh said capacity would remain reduced until 2025 and possibly longer.
Jonnathan Handshoe, an airline industry analyst for CFRA Research, said Boeing’s safety and production problems could worsen the airlines’ precarious situation.
Delays in deliveries of new planes, Mr Handshoe said, would mean airlines would spend more on fuel than expected because they would be forced to use older, less fuel-efficient planes that they had hoped to abandon or sell . In addition to growing supply chain problems, Mr. Handshoe said, the new labor agreements give big raises to pilots, flight attendants, mechanics and other workers.
In recent weeks, some airline executives have taken the unusual step of publicly chastising Boeing for its safety lapses and production delays. Hubert Horan, an aviation analyst, said airlines were trying to get better terms from Boeing on large orders they had already placed.
“There are normally provisions in contracts like this for significant penalties and cancellation if major problems prevent Boeing from fulfilling the contract,” Mr. Horan said. “The recent public statements are part of the negotiations on the final terms of penalties and remissions.”
On a call with analysts Thursday, Alaska Chief Executive Ben Minicucci said the company’s partnership with Boeing is a key part of the carrier’s future. The company had 185 Max plans on order, and Mr. Minicucci stressed that he had been happy with the Max until the latest incident.
But grounding Max 9 projects for several weeks and limiting Boeing’s production will hurt companies like Alaska. The company said it expected the FAA grounding alone to cost it $150 million – although it also expected to be “made whole” for that loss – and Mr. Minicucci said in a recent interview that he was angry with Boeing for its safety and production failures.
“We’re going to keep Boeing on the edge of the fire to make sure we get good planes out of this factory,” Mr. Minicucci said.