Boeing had hoped that 2024 would be the year to significantly increase 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.
That’s because the Federal Aviation Administration said Wednesday it will limit the plane maker’s production until it is confident about Boeing’s quality control practices. On January 5, a panel blew off the fuselage of a Boeing 737 Max 9 shortly after takeoff, terrifying passengers on an Alaska Airlines flight and forcing the pilots to make an emergency landing at Portland International Airport in Oregon. Almost immediately, the FAA grounded some Max 9s.
Since then, details have emerged about the jet’s production at Boeing’s facility in Renton, Washington, which has increased the company’s quality control scrutiny. Boeing workers opened and then reinstalled the panel about a month before the plane was delivered to Alaska Airlines.
The directive is another setback for Boeing, which had planned to increase production of the Max series of planes to more than 500 this year, from about 400 last year. It also planned to add another assembly line at a plant in Everett, Washington, a major Boeing manufacturing hub 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 jets to service after following those guidelines. United Airlines said Thursday it could resume flying some of those planes as soon as Friday.
The move is another potential blow to airlines. Although demand for flights has rebounded following pandemic lockdowns and the easing of travel restrictions, airlines have not been able to fully capitalize on this demand. Companies could not buy enough planes or hire enough pilots, flight attendants and other workers needed to operate flights. Rising jet fuel costs following Russia’s invasion of Ukraine also hurt profits.
Many airline executives are now evaluating how the FAA order will affect their fleet plans for the next decade — or more.
When introduced, the narrow-body, fuel-efficient planes were supposed to help the manufacturer compete with Airbus, which has been outsold by Boeing. However, the Max series has been plagued by mechanical and safety issues, including two accidents in 2018 and 2019 that killed nearly 350 people and grounded the Max 8 for nearly two years.
In its announcement Wednesday, the FAA did not say how soon it would lift the pause on production increases, instead giving Boeing conditions it must meet before doing so. He said it “will not be back to business as usual for Boeing.”
“We will not agree to any request from Boeing to expand production or approve additional production lines for the 737 Max until we are satisfied that the quality control issues uncovered during this process are resolved,” said Mike Whitaker, the agency’s administrator .
Boeing’s share price fell about 6 percent on Thursday and has fallen about 19 percent since Jan. 5.
In 2023, Boeing produced about 32 of its 737 planes a month on average, with plans to increase to 38 by the end of last year. It aimed to increase production further to 42 a month in 2024, an annual increase of more than 100 planes a year, and to about 50 a month in 2025. Before the landing of the Max 8 in 2019, Boeing was building 52 Max jets in month.
Many airlines said they welcomed the FAA’s decision to keep the cap on Boeing production until regulators are satisfied the company has improved quality and addressed safety concerns. But some airline executives have moved quickly to revamp their fleet plans on the assumption that the planes they’ve been waiting for will now arrive months or, in some cases, years later than they expected.
Alaska Airlines, which has a fleet of 231 Boeing 737 planes, was set to add 23 Max planes to its fleet in 2024, but said Thursday it expected “many of them to be delayed.”
“We have the right number of aircraft to fly our current schedule and take our guests where they want to go,” the company said in a statement. “We are still working to understand the impact of the FAA’s recently announced curtailment of aircraft production at Boeing.”
Southwest Airlines, which had expected more than 500 Max jets since October, said it would “reduce the number of Boeing 737 Max deliveries” it expected from the manufacturer and no longer expected any Max 7 jets, which the FAA has not certified yet, in 2024.
But some analysts said it was unclear how much of an impact the FAA order would have.
“It is likely that the FAA’s ramp restriction was irrelevant – at least for the move to 42 – since investors had already begun to buy into longer time at 38 to drive stability and quality growth,” Deutsche analysts said in a survey. Bank. notes Thursday, referring to the number of 737 Max planes Boeing builds in a month.
At least one airline was confident the shutdown would not hurt its orders from Boeing. Ryanair, the European low-cost airline, said in a statement that the manufacturer had “assured Ryanair that landing the Max 9 and maintaining rather than increasing current monthly production will not further delay Ryanair’s deliveries” for the summer of 2024 and the summer of 2025.
While the FAA’s decision to curtail production doesn’t help, Boeing has also been struggling to ramp up production for another reason — it and its suppliers have been unable to replace all the workers who were laid off, retired or quit during the pandemic. Finding new skilled workers has been difficult and it’s taking longer to train them, said Christopher Raite, a senior analyst at Third Bridge, a research firm. “The job base just isn’t there.”
Boeing has two Max airplane models in production, the Max 8 and Max 9, and two other versions, the Max 7 and Max 10, which are awaiting FAA approval before they can fly.
Even before the January 5 incident at Alaska Airlines Max 9, airlines were limited in how much they could grow by adding flights or routes. In April, International Civil Aviation Authority chairman Willie Walsh said capacity would remain reduced until 2025 and possibly beyond.
Jonnathan Handshoe, an airline analyst for CFRA Research, said Boeing’s safety and production struggles could worsen a precarious situation for airlines.
Delays in deliveries of new aircraft, Mr Handshoe said, would mean airlines would spend more on fuel than expected because they would be forced to use older, less efficient planes they had hoped to scrap or sell. In addition to increased supply chain issues, Mr. Handshoe said, new labor agreements grant big raises to pilots, flight attendants, engineers and other workers.
In recent weeks, some airline chiefs have taken the unusual step of publicly chastising Boeing for its safety failures and production delays. Hubert Horan, an aviation analyst, said airlines were trying to get a better deal from Boeing on large orders they had already placed.
“There are usually provisions in contracts like these for large penalties and cancellation if major problems prevent Boeing from fulfilling the contract,” Mr. Horan said. “In part, the recent public statements are part of the negotiation on the final terms of the sanctions and rebates.”
In a call with analysts Thursday, Alaska CEO Ben Minicucci said the company’s partnership with Boeing was a key part of the carrier’s future. The company had 185 Max planes on order, and Mr. Minicucci noted that he was happy with the Max until the latest incident.
But the weekly grounding of Max 9 planes and the cap on Boeing production will hurt companies like Alaska. The company said it expected the FAA grounding alone to cost it $150 million — though it also expected to be “recovered” for that loss — and Mr. Minicucci had said in a recent interview that he was angry with Boeing over the safety of and production failures.
“We’re going to hold Boeing’s feet to the fire to make sure we get good airplanes out of this factory,” Mr. Minicucci said.
