737 Moving Target
Last March, following two plane crashes, the FAA suspended Boeing 737 Max flights. Boeing expected the plane to be back in operation by the Summer, then September, then December, then February.
Today, Boeing Pushes Back Expected MAX Return until June or July.
Boeing on Tuesday pushed back its timetable for regulators to clear the return of the troubled 737 MAX for commercial service, saying it doesn’t expect approval until at least the middle of the year.
The company said its new estimate for the Federal Aviation Administration’s signoff—which people briefed on the matter expect in June or July—takes into account the need for approving training for pilots and “experience to date with the certification process.”
The internal target provided to airlines and suppliers is far longer than most airlines and industry analysts expected, leaving the global fleet short of almost 5% of planned capacity for the second peak summer season in a row, adding to the mounting compensation bill faced by Boeing.
No Surprise in This Corner
I fail to understand why another delay surprised analysts given that two days ago we learned 737 Max “Fix” Causes Entire Computer System to Crash
My comment: “The latest glitch is certain to cause more delays as well as increased lack of faith in the company.”
Boeing Raising Cash
Wolf Richter reports After Blowing $43 Bn on Share-Buybacks in 6 Years, Boeing Scrambles to Borrow $10 Bn, on Top of a $9.5 Bn Credit Line in Oct, to Fund its 737 MAX Fiasco
What a hoot.
Expect a lot more stories like that.
Worst Yet to Come for Suppliers
Leeham reports Boeing Hasn’t Hit Bottom Yet. Neither Have Suppliers.
The impact on suppliers is going to be profound. Spirit Aerosystems last week announced it would lay off 2,800 employees for an indefinite period. It has no information from Boeing about the timing to restart production, nor at what rate.
The slow ramp-up means recalling employees, at Spirit, and any other supplier will be a gradual return to previous employment levels. It will be challenging for Small suppliers to stay in business.
That analysis predates today’s announcement and the new computer system crash glitch.
A huge slowdown at Boeing and suppliers on top of a turndown in autos seals the fate of manufacturing for this economic cycle.
Key Manufacturing Details
- For the first time in history, manufacturing production is unlikely to take out the previous pre-recession peak.
- Unlike the the 2015-2016 energy-based decline, the current manufacturing decline is broad-based and real.
- Manufacturing production is 2.25% below the peak set in december 2007 with the latest Manufacturing ISM Down 5th Month to Lowest Since June 2009.
In related discussion, please consider Recession Arithmetic: What Would It Take?
Mike “Mish” Shedlock
Boeing might be able to get the software perfect and working in perfect harmony with the airframe and engines. What they cannot fix though is the public’s perception of this plane. Boeing haven’t realised this yet.
They will have to eventually, I see no other way out.
When they do change course, what will happen then? Will the airlines who need and wont be receiving planes and who ordered them sue Boeing? Would the cost of that bring down Boeing? If they were brought down financially, would the US taxpayer bail them out?
Presumably the fear of all of these things happening is why the execs at Boeing wont announce a new plane. I think that they would be better off accepting that this is the road that they now have to take.
“Boeing might be able to get the software perfect….”
Categorically, not.
Like VW, they may just about manage to get the diesel control software to pass currently applicable “tests” (which have been designed with heavy input from their own lobbyists and “industry body ‘experts’”, each of whom make several fold what the engineers writing the software does, and therein lies the problem….), but “perfect,” in the realm of anything complex, isn’t even a Utopian pipe dream.
This is why stock buybacks should be illegal for publicly traded corporations. Boeing management was covering up problems while inflating their stock compensation. I smell civil suit.
I don’t think that I would make them illegal. I would say that they should not occur either 5 years before or after any executive options have been granted or transacted. That way there can be no conflict of interest over them.
Then it’s loff to bankruptcy court. Boeing chpt 11 will just be yet another company (line starts down the street around the block) turning out the lights in this zombie dead ass economy!
Also from the Richter/Wolfstreet article:
“total liabilities ($136 billion) exceed its total assets ($132 billion) by about $4 billion as of September 2019, meaning that it has negative net equity”
Who here is willing to travel on the 737 max once it’s back online (if ever)?
What if the flight is scheduled on another plane and then switched to 737 max in the last minute? Stuff like this happens.
No and no.
If they pull a switcheroo then my client gets to pay for an extra hotel night and a change fee.
This is about principle now. It is incumbent on the consumer to be the last line of defense against corporate evil.
Apparently, they stopped production of the 737 Max
https://www.cnn.com/2020/01/21/business/boeing-737-max-production-halt/index.html
Too big to fail.
Too big to succeed.
Too big.
The stock traded as low as $305.75 Tuesday afternoon before it was halted.
This is what happens when management puts stock buy-backs ahead of quality and engineering.
I seriously doubt the MAX problems will be fixed. The FAA will have to review every design requirement from every specification, software component line-by-line, test plans, then test results using a REAL plane. It takes about a year for a single software item by an individual contributor to complete those steps. Integrating hundreds of items from multiple disciplines is orders of magnitude more time consuming. Factor in the fact that many people (contractors and retirees) are no longer with the company, so it will take even more time review technical designs. Plan A needs to be to open a few more assembly lines for existing planes.