The Boeing disaster keeps getting worse. In March of 2019, following a pair of high-profile airline crashes that claimed hundreds of lives, Boeing’s flagship 737 MAX aircraft was ordered grounded worldwide over technical equipment safety concerns, and the plances remain grounded as federal aviation authorities have yet to recertify the 737 MAX’s airworthiness.
On Monday, Boeing took a drastic step, announcing that it will halt production of the aircraft until it can be recertified.
Production temporarily halted
The decision to halt production was made by the Boeing board during a recent two-day meeting in Chicago, which came after the Federal Aviation Administration (FAA) announced a week earlier that its review of the aircraft would not be finished until some point in 2020.
The extended grounding and temporary halt in production could potentially prove disruptive to the U.S. economy. Beyond the negative financial impact for Boeing, the move will cause a ripple effect that could impact a number of airline carriers that have purchased the company’s jets and the parts manufacturers in Boeing’s supply chain.
The Daily Mail noted that Boeing has reportedly lost more than $9 billion so far while the planes have been grounded, and Monday’s announcement caused the company’s stock to drop 4% in value, as well as an additional 1% during after-hours trading. Smaller drops in stock value were also seen for some of Boeing’s primary parts suppliers.
Safety and compliance
In a statement issued by Boeing on Monday, the company noted that it was committed to ensuring that safety remained its top priority.
“We know that the process of approving the 737 MAX’s return to service, and of determining appropriate training requirements, must be extraordinarily thorough and robust, to ensure that our regulators, customers, and the flying public have confidence in the 737 MAX updates. As we have previously said, the FAA and global regulatory authorities determine the timeline for certification and return to service,” Boeing said.
The company noted it had approximately 400 completed 737 MAXs in storage and would shift the focus from building toward delivery of those aircraft. It further noted that, at least as of now, no employees would be laid off and would instead be temporarily assigned to other 737-related work or other aircraft model teams.
“We believe this decision is least disruptive to maintaining long-term production system and supply chain health,” Boeing said. “This decision is driven by a number of factors, including the extension of certification into 2020, the uncertainty about the timing and conditions of return to service and global training approvals, and the importance of ensuring that we can prioritize the delivery of stored aircraft.”
The company further noted that it would continuously reassess its decision and positions and strive to keep everyone, from customers to regulators to the supply chain manufacturers, apprised of the situation and future outlook.
The best of bad options
The Daily Mail noted that, until now, Boeing was building about 42 new 737 MAX planes per month in anticipation of being granted clearance to resume service.
This decision to hold off on production, while no doubt economically disruptive and far from ideal, is most likely the best option at this point, and hopefully the FAA and other regulatory agencies will move quickly to recertify the 737 MAX for service.