Boeing Will Cut Production Of Its 737 MAX By A Fifth


Boeing To Cut 737 MAX Production


| BY SANDRO VILLA | STOCK MARKET NEWS TODAY |

Boeing will cut production of its 737 MAX by a fifth and appointed a special board committee to examine its development of new planes, as the financial impact from two crashes of its best-selling jetliner deepens.

The aerospace giant said Friday that it will trim monthly output of the MAX by 10 aircraft to 42 by mid-April. The move overrides Boeing’s planned increase to 57 a month by this summer. Analysts had expected that higher production would allow Boeing to make almost 600 deliveries of the 737 this year, 90% of them the MAX model.

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Shares in Boeing fell more than 2% to $382.90 after hours on Friday following the announcement, valuing the company at $216 billion. Investors have wiped more than $25 billion from Boeing’s market value since last month’s fatal crash of an Ethiopian Airlines 737 MAX, the second in five months involving the jetliner.

Regulators are probing those incidents, and Boeing is proposing a software fix and additional pilot training to address a flight-control problem implicated in both crashes. A return to flight and resumption of deliveries for the 737 MAX is expected to be months rather than weeks away, analysts have said.

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“We’re adjusting the 737 production system temporarily to accommodate the pause in MAX deliveries, allowing us to prioritize additional resources to focus on software certification and returning the MAX to flight,” Chief Executive Dennis Muilenburg said in a statement.

Earlier Friday Boeing said it has identified a second software problem that must be resolved as part of an overall fix for its anti-stall system to get 737 MAX airliners flying again. The latest software issues were discovered in the wake of revisions to the automated stall-prevention feature called MCAS, according to people familiar with the matter. The system has been implicated in the March accident, as well a similar nosedive of another 737 MAX last October. The crashes killed all 346 people on the two flights.

Last week, Boeing presented a proposed fix to MCAS, which stands for maneuvering characteristics augmentation system, to some of its 737 MAX operators. But as a result of the extra engineering work, according to these people, completion of a comprehensive proposal by Boeing to fix MCAS is likely to be delayed until at least late April. Testing and approval by the Federal Aviation Administration could take weeks longer.

The jetliner has been subject to wide-ranging probes from regulators since the crashes. The Senate has been investigating the background of personnel who set training requirements for the MAX. The FAA’s acting chief told lawmakers on Friday that there had been no systemic problems in the qualifications of its staff members who established pilot-training mandates for the 737 MAX in the past.

Boeing on Friday didn’t update financial guidance ahead of its next quarterly earnings report scheduled for April 24. The production cut will reduce Boeing’s cash as customers hold back payment for undelivered planes. Boeing’s margins could also suffer as costs are spread over a smaller number of completed aircraft.

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The new schedule also widens the output gap between Boeing and rival Airbus, which plans to boost production of its A320 planes, the 737 MAX’s competitor, to 60 a month. Boeing’s output cut means it will likely cede its title as the world’s biggest plane maker to its European rival at the end of this year.

WRITE TO SANDRO VILLA AT VILLA.LEANDRO@SMN.TODAY
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