Boeing MAX production cut signals long grounding

  • Airlines seeking interim aircraft leases of six months.
  • At least one sees MAX grounding lasting until November.
  • Impact to Boeing is already significant and growing.
  • Impact on the NMA decision.

April 6, 2019 © Leeham News: Boeing’s decision Friday to reduce the production rate on the 737 MAX was a surprise in timing and scope.

This came so quickly and was steep, cutting production from 52 MAXes per month to 42. It comes on the heals that a second software problem was found, delaying submission of the MCAS software upgrade to the FAA for review and approval.

The production rate cut is effective in mid-April. This is lightning speed in this industry, where rate breaks, as changes are called, typically have 12-18 month lead times.

Boeing hasn’t announced what the second software problem is. LNA is told it is the interface between the MCAS upgrade and the Flight Control System, but specifics are lacking.

LNA interprets these combined events as indicative the MAX will be ground well past the Paris Air Show in June.

The impact to Boeing is going to be huge: customer compensation, deferred revenue, lost revenue, potentially canceled orders and potential lost orders in sales campaigns. The hit to the Boeing brand and impacts of multiple investigations won’t become clear for months to come.

A partial line-up of Boeing 737 MAX aircraft stored at Paine Field, Everett (WA). Photo by Jennifer Schuld.

Lengthy grounding

Even a return to the air by July now may be optimistic, based on LNA’s analysis of events and and emerging information through market intelligence.

This week, the government of Singapore said it now wants in on the international review of the MAX recertification.

It’s already publicly reported that a few airlines scrambled for airplanes to replace the grounded MAXes. LNA now hears that some airlines seek ACMI leases (Aircraft, Crew, Maintenance and Insurance included) in addition to “dry” leases (aircraft only).

This in itself is not unusual under the circumstances. When upwards of 50 Boeing 787s were parked because of problems with the Rolls-Royce Trent engines, airlines across the globe sought ACMI and dry lease airplanes.

What is new with the MAX is that LNA understands some carriers want six month leases. This takes the anticipated grounding to mid-September. At least one wants interim lift to at least November.

A 6-8 month grounding of the 737, Boeing’s cash cow which accounts for about 40% of The Boeing Co’s profits, will be devastating.

Just how bad this could be might be revealed on Boeing’s first quarter earnings call April 24.

Financial impact

The scope of the financial impact won’t be understood fully until a date for return to the air is cleared by international regulators. But here’s what to look for:

  • Customer compensation. Airlines that had the nearly 380 MAXes in service will want compensation for their grounding aircraft. Customers awaiting deliveries that are now deferred will want compensation.
  • Compensation can take many forms: cash, discounts on current orders, deeper discounts on future orders, training and MRO service credits and other discounts and credits.
  • Credits and discounts, while not current cash requirements, nevertheless suppress future revenues.
  • A few airlines threatened to cancel MAX orders, among them the two carriers involved in the crashes, Lion Air (for about 180 MAXes) and Ethiopian (25). Garuda Indonesia says it wants to cancel an order for 49 MAXes. Cancellations are not unknown but neither is it easy to outright do so.
  • The loss of potential orders in sales campaigns could happen. Airbus certainly had, and continues to have, issues with the Pratt & Whitney GTF and CFM LEAP engines on its A320neo family, but these problems are on the decline. Airbus may benefit from the MAX grounding. (On the other hand, Boeing’s need to sharply discount the MAX for compensation may make it difficult for Airbus to match the price.)

We’re talking billions of dollars in financial hit to Boeing that will take years to get out from under this impact.

Long-term outlook

Confining this portion to the assumption the grounding will be no more than 6-8 months, the hit to Boeing’s finances will be significant. But long-term, Boeing will recover and be strong.

Boeing wrote off billions of dollars with the 747-8 and KC-46A programs and it peaked at $32bn in deferred production and tooling costs on the 787.

The fundamental safety of the MAX remains unquestioned. The flaws of the MCAS and now the interface between MCAS and something else in the Flight Control System will be fixed. The airlines and lessors largely remain confident in the airplane, with the understandable exception of Lion Air and Ethiopian. (LNA believes Garuda’s sentiments may revolve more around its own finances, but since it, like Lion Air, is an Indonesian airline, it’s closer to the Lion Air crash than other carriers.)

There likely will be some passenger avoidance after the MAX returns to service, just as there was for the 787 after its three month grounding in 2013. Passengers eventually returned to flying the 787 and to other airplanes that were grounded: the McDonnell Douglas DC-10, the Douglas DC-6, the Lockheed Constellation and even the de Havilland Comet. So they will to the 737 MAX.

NMA decision

What will the impact of the 737 MAX grounding be on Boeing’s decision whether to grant Authority to Offer (ATO) for the NMA this year and potentially launch the program next year?

LNA does not see the Board of Directors approving ATO as long as the MAX is grounded nor until the financial impact is quantified.

With the uncertainties hanging over the MAX now, aggravated by the discovery of a second software issue and now the production rate cutback, the Board Board—which historically is fiscally conservative and risk averse—isn’t likely to green light even a sales campaign, LNA believes.

Furthermore, Boeing CEO Dennis Muilenburg Friday also announced the formation of a Boeing Board of Directors committee “to review our company-wide policies and processes for the design and development of the airplanes we build.  The committee will confirm the effectiveness of our policies and processes for assuring the highest level of safety on the 737-MAX program, as well as our other airplane programs, and recommend improvements to our policies and procedures.”

Until this review is complete and the committee either confirms the effectiveness of policies or identifies flaws and remedies, proceeding with the NMA seems unlikely.

Given the long-term questions, past, present and future over the business case of the NMA, this could even give Boeing the out to decide against proceeding with the NMA at all.

147 Comments on “Boeing MAX production cut signals long grounding

  1. Brace brace brace

    Troublesome that nothing that has come up with 737max is due to unknown/unknowns for Boeing (e.g. use of new materials, new technical solutions).

    The question is how did it end up there and how does it get itself unstuck

    • I think that the answer to “how they ended up there?” is found in the fact that Boeing themselves have announced a review into how they go about their business. That is, they now acknowledge that their commercial strategy has been wrong.

      How it gets unstuck? There’s all sorts of basic strategy changes that would help, but the real question is whether the best long term changes are compatible with US stock holder short-termist expectations.

      I’m convinced that the difference in business environment between the USA and Europe is what lies behind Airbus’s success in competing so well against Boeing. European (n.b. not UK) investors are generally much more interested in the long term than in short term gain.

      Worringly for Boeing, China too takes a very long term view of things. Their own domestic effort has not yet born fruit, but that doesn’t matter to them one iota. So long as they’re heading in the right direction they will one day get there.

      In short, its the old mantra “Develop, or die”. Unfortunately, spending on development is no good to shareholders interested only in the short term share price. Perhaps the best bet would be for Boeing to go privately held, or to move their HQ out of the USA.

  2. Boeing should never have sold aircraft that require experienced pilots to countries with less time in aviation. Airbus recognized the need in that market and does an excellent job of designing planes that need operators rather than pilots.

    The FDR output clearly demonstrates the lack of skill and awareness of the crew in ET302 in contrast to the Media Line.

    • Dear mr. Webber,

      Are you being sarcastic, or truly serious? Your constant deflection to Pilot quality is almost troll like. And your argument is crooked, are you saying Airbus is better in building safe planes, as they understand human limitations better?

      Good luck with pushing your dogma.

    • ETHIOPIAN Airlines has good pilots. The problem here is not human only because the link between the machine ( plane) and pilots ( humans) is obstructed by a software ( Artificial Intelligence). It seems like the machine doesn’t obey to pilot’s order. Boeing is invited to solve this conflict generated by artificial intelligence !

      • “… is obstructed by a software ( Artificial Intelligence). ”

        MCAS is about as dumb as it gets. couch potato siblings.
        It is neither about artificial nor about intelligence.
        MAN at its FUBAR best 🙂

        • Mr. Webber:

          I can remind you of AF447

          I can also remind you of the Canadian Air pilots who tired to land at SFO

          Or Atlas 767 that went out of control.

          That does not count UPS A300 flying into a hill on Approach, a number FedEx MD-11 crashes – Luft taking out an MD-11F.

          From what I see Ethiopian did a good job until they go bot bit by a backup system that you can’t turn under the circumstances .

          The last was a hail mary cause all they had been told had gone down the toilet.

      • Second the motion, BUT I was about to say developing country people tend to be younger and more computer concious, which makes me suspect they understood their MAX’s problems, in real, very short, time, as well as anybody, anywhere, could have.

    • What an ignorant, arrogant and chauvinistic statement to make…in retrospect, and from the comfort of an armchair on the ground! Are we to assume that all aircraft crashes on US soil were caused by rookie pilots from outside the US?

    • So much failure in just a few sentences.
      Did you make an effort Capt Jonathan Webber or it just came out naturally?

    • Well, I want to study the recorder information and think it through. The F/O, who people claimed had too few hours in type, was the one to call for stab trim cutoff.

      The big question is what level of ability is appropriate to rely on. Designers tend to think to high, while sometimes wanting to overdo warnings. The case for example with TWA wanting a red light for altitude alert, and apparently the case with morphing MCAS into an aggressive monster.Q

  3. Taking into account the high production rate of the 737, could there be a possibility of production slowing even further considering they may run out of space to park the assembled aircraft.

    Seriously, I wouldn’t be surprised if the NMA gets dumped and work begins on a new 737 replacement.

    • Launching a 737/10 replacement is 1/2 years too late anyway from a strategy point of view. Airbuses acquisition of the C series isn’t the bargain everyone says it is,development isn’t finished and ramp up is hardly begun. but its genius strategically

        • Just look what has just happened to Boeing’s monolithic narrowbody strategy.,and they still have the epic and risky challenge of swapping a rate 50 aircraft and the enormous supply chain. Again look how difficult that was for the NEO and MAX reengine.
          Remedying childhood malnutrition and making money on the C series is still going to be a challenge.

          • “Childhood malnutrition?” The C-series is a pretty darn well-engineered aircraft! Making money on them is really about sorting out the supply chain and reducing prices on parts from vendors, which Airbus is fully capable of. A challenge, perhaps, but the sort that both Airbus and Boeing have overcome in the past.

          • “Making money on the C series” is a lot more complex than just selling a load at a decent profit.

            Bombardier put a ton of R&D into it, including a brand new and highly respected FBW system. Airbus now have access to that, and could easily migrate their entire catalogue over to it in the coming decades.

            There’s also heritage building up with CF wings. Airbus now have access to that too, even if it is inconveniently located within the UK with BREXIT complications.

            Just these two things are highly valuable for Airbardier across their entire fleets for decades to come, and Airbus got access to it for €1. Even if the A220 doesn’t turn into a megaprofit machine, and just trickles along nicely, it’s still a huge strategic benefit for Airbus.

            Also it’s a solid reason to invest in more manufacturing capacity, which needn’t be C series for the rest of eternity, and I’m sure that if Airbardier gets along well then I’m sure the Canadians would be very happy to add their engineering and manufacturing capacity to the general Airbus pool of resources too and partner on future projects. It’s hard to see this as anything but a golden opportunity for them all.

          • All Airbus planes have FBW, why would they need to convert them to the Cseries version? I understand both types used sidestick controllers but there other differences
            Bjorn covered it in detail here
            Brexit is irrelevant for manufacture location as Airbus has sourced structures from outside EU including US for some time . Indeed it has a final assembly line in US with no problems either.

          • There’s no pressing need, the existing Airbus system is OK. But the FBW system on the C series is very good, seemingly, and probably based on a lot newer computational hardware too. Airbus have access to that technology now. If they wished to refine FBW, starting that by pushing it into the fleets through the A220 would be a good option, and it’s already developed

          • I really fail to see that the C series has any technology that Airbus does not posses.

            Yes they took a different approach, that is not technology that simply programing differently as to how pilots interact.

            Will Airbus move to it? Maybe. Will they move the C series (A220) to theirs? Maybe.

            Will they just leave both as are? Maybe.

            Arguments can be made in all those directions and Airbus has not said anything yet.

            As for wings, Airbus does CRFP wings as well. Is there some magical elixir in the A220 wing or is it just a well executed CRFP wing? (arguably from an aerodynamic standpoint, with a winglet) its not as good as a Boeing crank end wing)

            I forget who said it about Winglets are just and add on telling you that your wing is designed wrong.

          • “Nothing elixir about A220 [carbon fibre] wing.”
            Other than being the same span as the A320/321 aluminium wing!
            That might be very relevant if you want to save a few $bill in development costs and years to bring a whole new wing 9 of much the same size) to market.
            Even Boeing has adapted the 787 wing for the much larger span 777X and built a new plant for it( wouldnt fit inside ‘dreamlifter’)

            Remember how much a big thing it was for the 757 and 767 to share the same nose/cockpit, an expensive part of the plane to design and build

        • I don’t understand the “development isn’t finished” unless it refers to PIPs AB has mentioned. But that is really business as usual.

          The ramp up is clearly just beginning. They are now at about 4/month with a stated aim of around 14/month. Also AB has admitted there is a lot of work to do getting the costs down.

          Strategically because the A220-300 has same exit limited max capacity as the A319 any NSA AB designs does not need to be able to shrink to that size and can be optimized for slightly larger sizes than the A320 was. With newer materials and next generation engines that aircraft will have a range of over 4500nm possibly even 5000. This will give AB a seamless modern range of aircraft.

          Any NSA Boeing does will probably need to be optimized smaller because the E2 models are smaller. This leaves a gap to the 787, hence all the talk of the NMM.

  4. Given the questions now being asked about the amount of self-certification going in with Boeing, I expect 777X to be delayed while authorities challenge the certification of that aircraft.

    • I think this is Boeing’s biggest issue, they must look at ringfencing the enquiry, how far back will the new look FAA want to go back and forth to other programmes?

    • Well, there’s court proceedings between Boeing and a former employee over 777x safety (related to the electrical system), just as there was with the NG (bear straps).

      In the charged certification atmosphere we have now got following the 737MAX tragedies, externally visible symptoms such as these are more likely to cause other certification agencies to do their own deeper digging. That’ll delay the 777x.

      There’s also the possibility that the EASA will simply measure the amount of self certification that’s going on, and if it’s too high make a decision on that statistic alone.

    • I know I am a bit late for this but I believe, for all of their programs, Boeing now has (should have) more to fear from other certification agencies rather than from the FAA.

      Maybe the FAA will change its attitude/methods/processes but I haven’t seen any sign of that yet myself.

  5. Should nicely balance out the enormous fine Airbus is going to have to pay for bribery.

      • I sure expect the US to try for “tilting the table” in some underhanded way or other. Boeing must be protected by any means.

      • Almost certainly, the money has to come from somewhere and we are talking about some of the world’s poorest countries.
        That wasn’t really my point ,the US is highly likely to take its chance to stick it’s foot in.

    • Grubbie, can we keep this at the decent level this issue deserves?

      • I think Grubbie has made a fair point, the bribery scandal has included massive orders to state enterprises (example Sri Lankan). That money came from the countries own finances. We should be calling out any company that fails to act ethically.

        • Understand “bribery” correctly please : as a general rule (and not naming anyone in particular) the purpose of third party taxheaven-located Entities as (fake) appointed “Sales Agents” is to generate hedgefree cash for circulation back into Seller’s influence area, i.e. primarily to finance just that : INFLUENCE, a costly merchandise these days in the Western world, one that is hard to get one’s spendings approved for by nitpicking corporate Auditors and Tax administrations. Reformulated, the ethical abuse (if it exists) is not about corruption in Buyer spheres, no third world state or otherwise nominated Executive would risk adventuring into that kind of exercise, not at all : it is about arrangeing Western world Business into Third World zones in such manner as for proud and ethically irreproachable Customer entities to (unknowingly to these, of course !) appear to be sheltering the hidden malpractise as explained, letting these brave, blue-eyed, honest and unaware Buyers foot the bills for mascarade “danseuses” secretly (under cover by legal-counselled professional escrow “ABC Confidentiality Agreements”) greenlighted in petto by Sellers’ own corrupt “Ethical Committees” and duly authorised by PoA at Sellers’ top Number 0 levels of authority… that alone – if needed – explains the confortable retirement umbrellas of those people in the first place …

          • Hey guys, this is not about Bribery , this is about certifications .

            In this case Boeing hosed it up hugely (could they have done any worse?)

            I don’t agree with Airbus approach in some ways, but ethical y its not the issue that Boeing has stumbled into and deserves a resounding beating for.

            While I don’t agree with Airbus and how they dump a speed issue into the pilots lap (AF447) I do admire that they pursued it to the very end and recovered AF447.

            And not I don’t put the same onus on Boeing on MH370.

            Nothing indicates an aircraft issue, all indicates a crew issue and no one has a clue where the hull is.

    • Bribery related to fighter jets built and sold by another company Cassidian previously EADS( Eurofighter ) it included under its ‘umbrella’

  6. Excellent article Bjorn (as usual).

    I see the re-entry into service of the 737 Max being a very drawn out affair due to so many certification authorities around the world insisting on making their own judgement as to whether the aircraft is fit for service.
    It will be vastly different from the rubber stamp given to the 787 by the FAA in 2013 to return to service.

    It is almost certain that the Chinese will exploit the opportunity to play some degree of politics to remind Boeing, the FAA and the US that they no longer call all the shots. Boeing and the FAA will have to take this on the chin as the Chinese market is simply too big to ignore.

    In addition to the impact on any “NMA” ATO it will be interesting to see how Airbus will react in terms of launching the long awaited A321XLR – would Boeing be forced to watch helplessly from the sidelines as Airbus accrues massive orders for an aircraft that so many airlines want ?

    • There’s a myriad of possible outcomes. China might simply decide to put huge resources into giving Airbus expanded facilities, just to really annoy the Americans. After all, there’s strong suggestions that the only reason some Boeings sell is because Airbus cannot make their aircraft fast enough.

      Whatever Airbus’s product launch strategy was, it’s now been torn up. They will have drawn up a strategy around presumed lifetimes of Boeing’s programmes such as MAX, and planned their own launches for maximum effect. Now the future of MAX has to be in some doubt, and Boeing’s motivation to compete against A320 reassessed.

      It must be a bit like observing a wounded animal and having to guess what it’ll do next. Hard to predict what will happen when you poke it with a product launch.

      So, weirdly, Airbus’s only sound strategy right now is to bring their own plans forward wherever possible, or at least advance them to the point where they can react faster.

  7. Would that be THE chance for Airbus to push ahead with an A220-500 to “quickly” bring an additional aircraft in the 150 Pax class?

    While it couldn’t replace deliveries, it could possibly grab some sales from Boeing when airlines might be reluctant to decide for the MAX, while there are hardly any slots for an A320.

  8. The bean counters defeated the engineers. The 737 should have been replaced years ago. Instead, it was “studied” to death, with the MAX a belated attempt to slow down defection to the Neo after American Airlines’s Neo order.

    • Or they could have gone with a design strategy forced by the design constraints.
      1) Limit the engine to about a 64″ diam fan that fits.
      2) Optimize that engine for the 737-7 and 737-8 with a smaller core and smaller thrust requirements. Lighter, lighter, lighter.
      3) Build the NG model 900ER until it is replaced with NMA or NSA.

      • Yes, they could have gone the routes you layout but the end result would have been an aircraft even more suboptimal versus the competitor. Boeing did originally claim that the NG could hold its own against the Neo… until long-time customers started defecting.

        In future business case studies, the MAX will be used as an example of a short-term financial gamble ending up costing the company much more in several ways than if they had followed the now obvious correct course of action.

      • OR, Boeing could just get real, and called it a day for the aging B737 design, and made a new one from scratch. A 52 year old veteran aircraft like the 737 belongs to the museums.

        At some point a manufacturer have to replace their aging products, and come up with new ideas. At Boeing, the NG should have been the last of 737 series.

      • The 737 was toast all the way back in the early 1990s when the A320 came into service. Even if one ignored the engineering advantages the A320 obviously had, the financial evidence started mounting up straight away.

        The fact that Airbus went from 0% of the market to a share of it that kept growing over the decades has been continuously overlooked by Boeing. It’s not been good strategy from Airbus, it’s a complete failure of Boeing’s board to recognise their declining position wrt the market for decades. Sure, Boeing sales rose, but have been falling backwards wrt to Airbus all this time.

        Boeing’s bean counters and shareholders have been asleep at the wheel. The current crisis (which is evolving into a full blown scandal, and might become a full on criminal case, which might put some of the management in jail) is the outcome. Carefully crafted financial figures are an excellent means of self-delusion. The market does not lie. Declining market share is a message, “we don’t want your product”.

        Boeing may now not be able to do an NSA programme, or use the 737MAX to fund a NMA. Shareholders may have to dip into their pockets.

        If the Boeing share price did collapse, it’d make it far easier to take Boeing private. Ironically this is perhaps one of the best outcomes to permit effective strategies to be followed without having to sate the short term thinking of a stock market. With a decent strategy and reform of their management practices, Boeing would be a fantastic long term money maker for someone with pockets deep enough to buy up there whole company.

        • “Boeing’s bean counters and shareholders have been asleep at the wheel. ”

          Quite the opposite. They understood exactly what they were doing and were very happy with it. After the debacle of the 787, they did not want to go the route of an all-new narrow-body where the financial return would be over a decade off (if not more, potentially).

          • Pretty wild speculation that Boeing would be taken private.

            Its not like a company that size can be.

          • Yes . A $220 bill market cap company is far too big for a leveraged buyout.
            Maybe a cash/shares buyout by Lockheed or similar , where they sell off the defense business could get regulatory approval.
            Its size means it cant get taken over and means it will sail through all this with no long term effects, even the execs to be terminated are at the end of their careers.

    • This second software issue is probably causing a complete review of the full Max FCS software to get ahead of any potential additional issues, hence the delay and production cuts.

    • Agreed, and presumably it’s something that wasn’t found first time round in certification. Followed to a logical conclusion, they might end up looking at a whole load of software afresh across a lot of programmes.

      After all, a software certification process that missed an issue important enough to keep aircraft on the ground has itself been demonstrated to have failed. Anything else previously certified by process has got to be questioned. If the FAA don’t question it, others like EASA may.

  9. To some degree, I think the MCAS issue was a failure to prioritize and invest in engineering. So now the solution is to double down and invest less in engineering and delay the NMA?

  10. “The fundamental safety of the MAX remains unquestioned.”

    I would disagree with that statement. The re-certification is going to asses the reason behind the MCAS fix (which was answering a certification issue). This may result is some un-grandfathering clauses that will probably impact the Max business case.

    Another major error that Boeing is doing is that it is not halting Max production, as the situation is calling for, and restarting NG production to match a new sales campaign as compensation to MAX owners or owners to be.

    • I thend to agree with you CBL. I mean the 737NG doesen’t have MCAS,so why does the MAX need it ? Isn’t the MCAS a patch to beging with ?

    • It would make no sense to restart NG production unless the MAX customers wanted to switch to NG. And I doubt many of them would, as they are in the process of upgrading their NG fleets.

      • While I think this will be ironed out (pun) its also possible that the 42 a month will shift to NG as an interim measure.

        I never expected them to drop rate and not sure how they can do it or manage it.

        Suppliers contracts come into play as to that short and consequences.

        If the contract is for X numbers and Boeing does not take X numbers Boeing has to pay.

        They may hold and store them.

        How fast anyone can shift back to more NG systems? ergh. Is it even worth it?

    • I think the fundamental safety of the MAX is very much in question – perhaps not in the US, but elsewhere, as evidenced by the Canadian and European safety authorities saying they want to do their own safety reviews (i.e. not rely on the FAA to do that work).

      One of the biggest long-term impacts from the MAX debacle is that along the way, Boeing has broken the world safety regulatory apparatus. If the FAA’s credibility is shot to the point that in the future, other authorities require that they do their own certification work from scratch, that’s a huge future economic drag on Boeing.

  11. My guess is thst boeing is considering using flaps in the lower speed regions to counter the move of center of lift at High AoA. In higher speed the center of lift is moved backwards and the the elevator movement they implemented is to aggresive at higher speeds. Mcas need to be speed sensitive.

    • They are going to turn it into a BORG plane with all the stick on “helper” thingies. And noon will know what it does if the
      environment comes up in a funny. 🙂

    • I think they should use flaps all the time. As you say it does push the Centre of Lift back. But it also switches off the monster thst is referred to as MCAS.

      Can’t fly very fast though, unless the flaps are beefed up.

      • Wow, flaps down all the time.

        Ok, back to the NG we go, talk about destroying fuel efficient and turning it into a very short range aircraft.

        • The efficency of the 737 MAX wasn’t very good in the first place. So what’s a few (a lot) more gallons and a few (a lot) more miles.

          Really TransWorld get some perspective. It still flies. But at least it will be safe!

          • Philip:

            In the world or real, what you are suggesting is taking the rubber off your rims and running around on the rim.

            Yes its been done, no it has no future.

            You seem to have missed this was all about eeeking out more fuel efficient (despite the other costs)

            Running Haroun with your flaps down its simply rising a surrender flag (let alone the impact on schedules).

            And where do you get the MAX was not efficient ?

    • The excessive pitch-up at higher AOA should be compensated by a larger elevator surface as general aircraft stability moments would dictate. A control fix would be acceptable if it is engineered with the required redundancies and fail safe measures.

  12. 42/mo.: it is my understanding that below this figure, Boeing will have to start laying off people.

    “The fundamental safety of the MAX remains unquestioned.” – that may be challenged; the MCAS was designed to avoid the high probability of the aircraft stalling – and that is the initial problem.

    Do we know how many times MCAS was triggered during airline operations on all MAX aircraft (and worked as designed since sensors were OK) ?

    • Your final question is excellent! I’d love to know the answer…

      • “In a seperate release, Spirit Aerosystems said it will continue to produce 52 737 fuselages[per month] in its Wichita facilities: “Spirit will store accumulated 737 MAX shipsets at its facilities. Those shipsets will then be transferred to Boeing to support their production plan”.
        CFM hasnt said it will reduce LEAP output either.

        Seems to suggest Boeing will later ‘catch up’ the reduced rate, as it will have to for financial reasons

        • Where will Boeing be able to store those shipsets? I think they cannot be stored outside, can they?

          • Why not. They are railed to Seattle au natural…they used to have special rail wagon hoods but not anymore. Maybe they can use the ubiquitous plastic wrap for a couple of months protection

          • Yea, not room enough to store them inside.

            They make the trip thorough some nasty terrain and weather all year around.

            Its going to make for an interesting picture.

            Shade of WWII aircraft production.

          • OK, fair enough.

            What about the other components/subsystems? Can all be stored outside?

          • I have a gut feeling that is isn’t going to end well.

            There is a picture in my head of countless half-finished 737s here and there and everywhere. What if MCAS can’t be fixed because it’s a patch to something too big – a serious stability problem that would require substancial changes to the tail/landing gear/pylon,… and airlines not accepting NGs respectively MAX2s with CFM-56s?

            What if Boeing engineers have known all the while that the MAX isn’t a solid plane? What if they sqeezed it through certification to avoid exactly this to be detected?

            If this is the case Boeing should go in full emergency mode to save the company and consider stopping the 737 production as soon as possible, converting all that is in the pipeline to NGs. If they fail to do this they are heading for chapter 11 and a graveyard of 737s.

          • thysi:

            Not likely, hulls have inherent corrosion resistant build into.

            Things like motors and hydraulic pumps are sealed and or in location water does not get to.

            Tires, meah, yea.

            Huge mess, and do you keep making wings and how do you stack those?

            Ergo, complete the aircraft and you can store it for months.

            This really does look bad and my 3 months is now out the window (sigh).

  13. So, after years of putting shareholder interests first, and over $40 billion in stock repurchases, maybe it’s time to revisit the business model, and shift the focus less on shareholders and more on productivity, performance, and quality.

    Everyone recognizes the importance of human factors in steadily improving the safety record in this industry. We see a lot of attention on regulatory capture, which is another example of designing a system around human factors. Shouldn’t we also be looking at the workplace culture, and ultimately the business model?

  14. “The fundamental safety of the MAX remains unquestioned.”

    Why? This is what Boeing has been saying for months.

    In God we trust, the rest we audit.

    • Bugs like company.
      i.e. dumb stuff like MCAS does not come unattended.
      They bring family.

  15. From Dominic Gates article, it is clear that the 737 MAX certification was rushed to meet Boeing’s self imposed EIS deadline. Non US regulatory authorities will want to do a thorough recertification. They will be under little pressure from the airlines, which generally have extra capacity after the summer, until the end of the winter schedule – when they have to plan for next summer. Boeing should plan for the MAX to be grounded outside the US for 12 months.

    Reentering the Chinese market may well take longer.

  16. While I am not afraid of the 737,

    I also question the statement “The Safety of the 737 is Unquestioned. ”

    MCAS has once again proven that its not a single point of failure (it is a failure), its a cascade of failures starting at one point.

    We now find you can’t use backup crank system with aerodynamic loading on stabilizer .

    What in the world may I ask good is a backup system


    So now we have to revert to odd strategies in an emergency to get the backup system to function.

    And what would it cost to fix that?

    • @TransWorld- Looks like that particular statement was edited out.

      What worries me is the discovery of the second software bug, allegedly involving the interface between the MCAS and Flight Control. The fact that specific details are lacking is ominous in itself, because we don’t know what the bug is or whether it played into the two crashes. To all public appearances, Boeing is still to keep their failures and blunders secret while compromising public safety, which is very bad indeed.

      • Ah, stupid me, it was “The fundamental safety of the MAX is unquestioned”, which is still in. I agree with your comment 100%, since this statement just doesn’t make sense in context.

        • Cake:

          I think it got written in hyperbole so to speak and the general soundness of the 737 got ramped up.

          MCAS looks to be an easy fix.

          Dealing with stabilizer authority and how to ensure pilots can get it somewhere near neutral seems a key issue.

          I am reading Trim does not have as much authority as needed and that may weigh into this decision wise

          And to think that as far as I know, a 737 never has stalled into a crash (some totally disoriented pilots that have crashed) and the cure is a killer.

          Thalidomide ?

          • Thai airways flight 365…on odd accident with 2 planes landing close together.

  17. Safety critical software is a process. The MCAS issues aren’t random. They occurred because Boeing failed to follow process. It’s highly likely the same lack of process applies across a substantial part of the MAX development and the second discovered issue relates to that. If the quality can’t be assured by fixing issues in isolation, but the whole process needs review, that’s going to be long drawn out and massively expensive.

  18. “The fundamental safety of the MAX remains unquestioned.” I’ve seen plenty of people questioning its inherent stability, which seems to be fundamental safety to me. As to whether said people have the knowledge to make these justified questions is another matter.

    “There likely will be some passenger avoidance … just as there was for the 787. Passengers eventually returned to flying the 787… So they will to the 737 MAX.”. I’ve no doubt that many people would return to the MAX as soon as it is cleared but people didn’t die in a 787 crash, Boeing (or the FAA) didn’t then act so poorly that yet more people died in a second crash, and there was no glare of legal cases against Boeing, whereas there will be with the MAX. This must be a dream, reputation making case for lawyers and Boeing is not going to be able to make it go quiet. All of the others (Comet, DC10 etc.) were in a completely different age when media could be controlled.

    Boeing C-level and Board also still doesn’t seem to be grasping the seriousness of what is happening. How else to understand that the external appointments for the ‘safety oversight commitee’ they announced this week are a finance specialst CEO (Ed Liddy), a finance specialist CEO (Lynn Good), a finance specialist CEO (Robert Bradway – admittedly he does have a science Bachelors), and a military & government type (Edmund Giambastiani). All may have genuine relevant organisational experience but spot the engineering talent, spot the non-Americans, spot the variety of positions held….

  19. I do have to contest the comparisons being drawn here, particularly in this paragraph –

    “There likely will be some passenger avoidance after the MAX returns to service, just as there was for the 787 after its three month grounding in 2013. Passengers eventually returned to flying the 787 and to other airplanes that were grounded: the McDonnell Douglas DC-10, the Douglas DC-6, the Lockheed Constellation and even the de Havilland Comet. So they will to the 737 MAX.”

    B787 – The battery fires thankfully didn’t kill any passengers or down any planes, and the fires didn’t start a systematic inquiry or a criminal investigation into the entire certification process.

    DC-10 – McD had plenty to answer for with the baggage door problems and the scandal from that, and the accident that actually caused the grounding was due to bad maintenance as much as design deficiencies regarding slat retraction. The type certificate was restored 5 weeks afterwards, once the fixes were in place. As bad as it was, there was never any serious question of certification.

    Constellation and DC-6: Very much the early days, so the causes of crashes were less understandable and the corresponding accident rate far higher. More forgivable in the context of their era.

    De Havilland Comet : Had to be pretty much rebuilt structurally as the Comet 4, and the very long grounding and detailed re-engineering work pretty much let the likes of the 707 and DC-8 rise to wreck the Comet’s market. I can understand why the public would fly it again, but also why it would fail in the face of new competition.

    None of the accidents caused by these types caused the kind of criminal investigation and scandal brought upon by the 737 Max crashes. As noted previously, the criminal investigation aspect of these crashes is unprecedented, and so is the investigation of FAA competence. If the flying public associates the 737 Max with a systemic failure of both the private and government institutions meant to protect them and keep them safe in the air, something that never happened even with the scandalous revelations around the DC-10’s cargo door issues, I doubt there’d be much willingness to get into the aircraft again barring a full-scale recertification of the entire 737 Max series by other aviation agencies. This will likely extend to the certifications of the 777-8 and -9.

    All of this makes me think that the optimistic tone surrounding Boeing’s long-term prospects is rather misplaced. Boeing is likely to take a hit long-term in a way proportional to the dramatic, unprecedented short-term issues on display here.

    • Comet wasnt rebuilt structurally , yes the later versions were longer but that was the usual design strengthening.
      They had tested the Comet for fatigue life during development but it wasnt the shorter flying cycles of the faster jet aircraft. As well the design and production errors ( punch instead of drilled rivets) related to the fuselage cutouts – hatches , aerials ( which were used on pressurized piston airliners too, the square windows werent definitely linked to the crashes) were revealed when they tested a complete fuselage of a flying plane, not ‘test coupons’.

      The not well publicised fatigue problems to the 737 fuselage continued with mid life Southwest 737-300s failures which didnt cause crashes ( 2011, 2009). The original 737 design had a ‘thin skin’ to save weight because of its wider fuselage compared to its competitors in the early 60s.

      • Perhaps I chose my words poorly with respect to the Comet – they were structurally strengthened and their skin thickened substantially in addition to the changes in production errors that you mentioned. But nevertheless, this was a considerable change from the previous Comet 1 aircraft and it did pay off.

        The 737 fuselage deficiencies are a different matter, having to do with fuselage panel delamination and epoxy contamination, especially when exposed to saltwater. You forgot to include the Aloha 737-200 that had its top blow off altogether after accumulating too many cycles in Hawaii’s salty climate! Those tear-stopping strips prevented the three 737s in question from going the way of the Comet (but not without a loss of life in the Aloha case…RIP C.B. Lansing)

        Unless I’m mistaken the 737NG models were introduced in 1997 and used to replace the Original and Classic 737 series because of the delamination issue, and AFAIK haven’t structurally failed so far.

        • Thanks for that .
          The 737-300 fatigue problems were found as mentioned the reports
          SWA 737-300 07/09 near Charleston
          “Postincident examination of the airplane
          revealed fatigue cracking of the fuselage skin near the leading edge of the vertical stabilizer
          adjacent to the rupture…..At the time of the SWA
          event, the airplane had accumulated approximately 42,500 cycles and 50,500 hours.

          SWA 737-300 01/2011 near Yuma
          resulted in multiple site damage fatigue cracking and eventual failure of the lower skin panel….panel above wing..48,748 total hours with 39,786 total cycles.

          From the final report-“Microscopic examination of the longitudinal portion of the fracture surfaces revealed thumbnail fracture features consistent with fatigue cracking that originated from 54 out of 58 rivet holes.”

          ‘Delaminations’ is avoiding what was the primary cause – fatigue cracks. The location on fuselage was different in both cases although at crown and of course the dates of failure are well after the later NG went into service

  20. China Morning Post
    FAA invites the Chinese to review the re certification of the Max????.

    • It sounds like the FAA has realised that it’s reputation abroad is toast.

      However, inviting other agencies to be part of the FAA led return to flight effort is downright risky. What if there’s a disagreement? And it’s quite clear that the motivation is to do Boeing a favour and get it flying again ASAP. That in itself doesn’t look great, the motivation should be to see to the safety of the aircraft no matter what. There are better ways of doing that without trying to embroil other certification agencies into what they might see as an inferior recertification process.

      I’d say that it would be far better to let the FBI, DoT and DoJ investigations run their course, address the issues identified, and then go through the 737MAX and especially the updated MCAS with a fine tooth comb. And then ask the other certification bodies to review their work.

    • It is pretty clear that China isn’t going to let go of this opportune moment without squeezing out some really sweet concessions from the US. As for what that may be we have to wait and see. Favourable trade deals, low Boeing prices, tech transfer, manufacturing plants, certification amendments to recognise their indigenous aircraft…a few things to consider.

  21. I understand the last 737 NG line is still running building 737- 800/900ERs for Delta and Alaska, KLM etc

    Could the production rate reduction be because the last FAL was going to be switched over to the Max but instead will be halted ?
    The military version has its own wing assembly station using the older ‘vertical process’ that was changed some time back for the airliner versions.
    Military versions include P-8 and C-40

    • Further info on the NGs left on the skyline.
      “Revenue-wise, the 737 production line currently is fully dependent on the 737NG, which is running out. Boeing hasn’t released its March orders and deliveries update yet, but by March 1 it had a backlog of 24 737-800s, 46 737-800As, 2 737-700Cs, and 12 737-900ERs, or 84 NGs in total.” airinsight
      Doesnt seem to include P8 models but the 700C models would be the C-40 for USN

  22. If the NMA does get launched, they can forget about a rushed 5 year development timeline with a 2025 EIS. I’d expect the regulators to overhaul certification and testing processes as a consequence of all this.

    • 2025 for 797 EIS was as much non-sense As the 4 week MCAS software fix of last week. Hopes & realities get mixed up.

  23. Muilenburg needs to go. so does half the board and much of the senior executive team. this company has been run into the ground by McD alumni who only care about stock price and could give a crap about producing a quality product.

  24. I am not pilot but an engineer working with gas turbines for electricity generation.
    Have been reading here and some other places about the stab
    Trim cut off and the difference with the horizontal stabilizer etc.
    There are some pilots who are still arguing with one another
    about how to operate the controls and the definition of certain
    jargon used on the business.
    How in the world this happens?
    Why don’t we have professional with a degree piloting these
    It seems that anybody and their mother can become a pilot
    after 2 years at Embry University.
    These arrogante more confident that they should be so called
    “Captains” are still operating with the same attitude and knowledge than the Red Baron in 1917.
    We need to review the whole business, from
    Design, manufacturing, QC, operation, training and profitability.
    Profits and environmental fanatics are pushing the limits of safety.
    At the end people pay with their lives.

    • “We need to review the whole business, from
      Design, manufacturing, QC, operation, training and profitability.”

      I would include airline regulation in the review. It makes absolutely no sense to be pumping out narrow-bodies when our airports infrastructure is severely deficient, and no relief is on the horizon.

  25. For me this is cash flow related – just imagine how much capital is bound when you park 52 new planes each month in the dessert.
    You can calculate 40, 50 or 60 Mio. $ each, depending on what real price and cost you assume.
    Airbus can’t profit. They dont have neo slots to fit in, but i would love to see them going as hard after Lion Air as Boeing did go after Hawaian to kill the A338.

    Actually, what shocks me most is, that in the end Boeing will get away with it.

    • They have had around 35 or so KC46s parked waiting for delivery for some time…that isn’t gpoing to plan either

    • Lionair has refused to take at least 4 MAXs this year and were already negociating for A321NEOs. Not a case of AB going after Lionair, but Lionair chasing AB.

  26. From wikipedia
    “On 5 November 2014, Lufthansa Flight 1829, an Airbus A321 was flying from Bilbao to Munich when the aircraft, while on autopilot, lowered the nose into a descent reaching 4000 fpm. The uncommanded pitch-down was caused by two angle of attack sensors that were jammed in their positions, causing the fly by wire protection to believe the aircraft entered a stall while it climbed through FL310. The Alpha Protection activated, forcing the aircraft to pitch down, which could not be corrected even by full stick input. The crew disconnected the related Air Data Units and were able to recover the aircraft.[41] The event was also reported in the German press several days before the Germanwings crash.[42] The German Federal Bureau of Aircraft Accident Investigation (BFU) reported on the incident on 17 March 2015 in a Bulletin publishing the flight data recorder and pitch control data in English and German. As a result of this incident an Airworthiness Directive made mandatory the Aircraft Flight Manual amended by the procedure the manufacturer had described in the FOT and the OEB and a subsequent information of flight crews prior to the next flight. EASA issued a similar Airworthiness Directive for the aircraft types A330/340”

    I would suggest that any new type of airplane would be operated by LH under the authority of the BFU before entering full service. The fact that several ( maybe dozens ) of such incidents occurred with the Max with no one reacting is appalling .

    • That’s the only one I could find with regard to the A320. By disconnecting the units, they disconnected the stall protection system which was stopping them from pulling up. Once disconnected, they pulled up and went on their merry way.

      Simple really!

  27. I do wish Boeing well. We need a healthy aerospace industry and Boeing is key to that.

    But they do need to be careful. The narrowbody market will change in the next few years from demand outstrips supply to supply outstrips demand.

    There will be a lot of old but airworthy A320s and 737 NGs available. Airlines could take the hit with fuel prices for a few years whilst the A320, MC-21 and C919 continue ramp up.

    Then the A220. I think the A220-500 will be announced at Paris. Five years to develop. By then Airbus will have production sorted out. Thirty/forty a month – not a stretch.

    With regard to the 737 MAX, I don’t think it is safe. They need to make hardware changes not just software changes.

    I know I won’t fly in a 737 MAX. I didn’t fly in a DC-10, despite working for MDC for 10 years!

    • “But they do need to be careful. The narrowbody market will change in the next few years from demand outstrips supply to supply outstrips demand.”

      Not enough runways are being built to accommodate the net increase
      in the narrow-body fleet. Furthermore, using London-Barcelona as an example, it is crazy that there are over two dozen non-stop spread over 12 hours. And that is just one city-pair. There are far better uses of a scarce resource.

      “There will be a lot of old but airworthy A320s and 737 NGs available. Airlines could take the hit with fuel prices for a few years whilst the A320, MC-21 and C919 continue ramp up.”

      Fuel prices are “artificially” high. In a couple of years they will be back down in the $30/bbl range again.

      • Don’t disagree with a word you have said. Unfortunately you need to put a lot of my posts together to get my full view of what will happen next.

        So to add, the standard narrowbody will upgauge to 170-240 seats, but do short and medium sectors. Basically a three model A321 replacement with a 5 row stretch and a 3 row shrink. The same applies to regional narrowbodies, they will upgauge to 130-160 seats, the A220-300/A220-500. There will also be a lot more A330-800/787-8 size airplanes about doing short to medium sectors.

        The jewel is the 3 model A321 replacement, 170-240 seats. Estimates vary, but 10,000-15,000 over the next 20 years.

        I’ve said it many times, Boeing need to dump the NMA and go after the 170-240 seat market with a new airplane. Airbus will have to respond.

        As it stands, Boeing are between a rock and a hard place. Giving the rock and the hard place a lick of paint won’t work. They need to cut loose.

        • I think Boeing can’t do a new jet a this moment. I think a lot of cash will leave the company because of this MAX situation and they really need their cash cow back in the air and a lot more orders to get the money back. If they now introduce plans for a new aircraft i think most companies will wait for the next gen single aisle and thus a reduced amount of orders. The backlog is that long that a new customer ordering now will probably would get his new aircraft, when a Single Aisle NG from Boeing will have EIS if they announce it just now I don’t think that Boeing can afford an Osborne effect right now. They will be bound to the MAX for quite a while.

          • Even if Boeing was to launch a new narrow-body program next year, entry into service would be at least 5 years out.

            Wall Street does not want Boeing to spend $8-10 billion on a new program when the current program can’t handle the backlog, even with the high production rate.

            So the return on a new program is beyond the investment horizon of most of Wall Street. And there is the added risk that the inevitable recession lands hard and lasts a decade – a distinct possibility.

          • @Joerg: Contrary to your conclusion I think that Boeing has no other chance but to do a new jet at this moment. To get the MAX back in the air might require a significant change in soft- and hardware which will require a new certification. Would it be worth all that trouble to end up with still a rather ancient plane?

            To handle the existing planes, the current production and existing order looks like a gargantuan piece of work, but not addressing it would spring desaster.

            I believe that if Boeing puts all force behind the development of a 737 replacement, using already existing design work, the 787 cockpit and FBW, standard aluminum wing and body, they should be able to at least match the performance of the A320 and retain or even grow their market share.

  28. Lots of attention on the impact the MAX problems have on Boeing but end the day its the airlines that suffering.

    UAL comes to mind, 100 MAX10’s on order to “replace” 757’s, maybe not the greatest idea? Mean time the main competition, AA, DAL and Jetblue have large orders for 321’s.

    In India Spicejet could feel the pinch against Indigo and in Asia LionAir is in competition with AirAsia. Vietjet has 80 Max10’s and 100 MAX200’s on order, fortunately also ~120 A321’s.

    Ryanair has 135 MAX200’s on order and operates 438 B737-800’s that eventually needs replacement. Maybe time for AB to launch an A320+ (A320.5) and/or short range/LGW A321 with 30Klb engines, etc.?

    At this years Paris Airshow we could see a lot of fancy footwork and BS from Boeing? May this lead to the NMA effectively become a shorter range (4000-4500Nm) aircraft replacing the MAX10?

    After these sad events can see BA EIS an NMA 5 years after launch.

  29. Boeing could capitalize on this situation. Boeing has a reputation of being a pilot’s airplane. Airbus doesn’t. Airbus is computer controlled, no stick, no control column, no yoke. The computers go down so does the airplane. Boeing has been attempting to compete by becoming more like the competition. The MAX crossed the line by implementing MCAS, a system that was hidden from any real pilots flying the MAX.
    Boeing could change its strategy, make all of its airplanes fully controllable in the event of computer failure, use computer controlled systems as enhancements. Then market their product on the basis of safety by pointing out the weakness of fully computerized flight controls.

    • Yes Boeings 777 FBW has pilot overides while Airbus version has hard limits.
      Boeing changed that philosophy a bit for the 787 where it now has hard limits on AOA with the flaps extended- according to Bjorn.
      I would expect the new 797 to have even more ‘hard limits’ on its FBW
      All FBW planes have high level redundancy for the computers, ‘the idea the plane go down’ without them is false as the pilots can then give direct control.
      You should check out Bjorns posts on FBW Bill as you seem to have some misconceptions about Boeing and
      its automated FBW planes -777 and 787

    • “Airbus is computer controlled, no stick, no control column, no yoke. The computers go down so does the airplane.”

      No it doesn’t. An Airbus would go into a sort of basic/direct mode.

      • “In the Mechanical Back Up mode, pitch is controlled by the mechanical horizontal stab trim system and lateral direction is controlled by the rudder pedals operating the rudder mechanically. This mode is intended to allow the pilots to maintain level flight while resetting flight control computers after a temporary total loss of power.”

  30. Scott

    I’ve been using risk averse to describe Boeing for a very long time. I spelt it with a “d”. I now know there is no “d”

  31. In a lengthy discussion such as this it would be really helpful if submissions could be automatically numbered. It is often difficult to connect responses to previous posts.

  32. I know that even if the MAX is declared ‘safe’ at some point ie able to be controlled by the now better informed pilots with software that doesn’t need fighting in the cockpit, in the cabin will it still mean unexpected plunges towards the ground before flattening out? I’m not sure that sounds like a ‘solution’ for nervous pax.

  33. Boeing went after Hawaiian to kill the A338, they went after Delta (with DoC) to kill the CSeries. Still I don’t expect Airbus to do something similar.

    • The only positive that could come out of that is if Hawaiian goes 8x in coach on the 787. Other than that, Boeing is complicit in a race to the bottom for seat width comfort. They chose the width of the 787 knowing full well it would be a cramped 9x. They launched the 777x for a cramped 10x, instead of the option for a new fuselage.
      I hope they will choose more carefully on all new aircraft and go with a standard 20″ wide center to center on seats and aisles. If the MCAS problems speed up any replacement of the 737 sector, that would be a step in the right direction. The 737 does not have 20″ cc seats and aisles, and the flight deck is said to be cramped and noisy.

      • Ted:

        Hawaiian sets the seat width not Boeing.

        Customers decide if they want to put up with it.

        I don’t see what the relevancy to the 737 is.

  34. Interesting to see how the financials stack up with this huge issue hanging over them.

    You get the impression that BA have been very aggressive with their quarterly reports — I wonder if this will now mean that their results going forward show the full extent of the MAX issue very quickly.

    The last BA results looked too good to be true unless the second B787 line is paying out half the wages of the original WA line or the B737 costs have shrank at a huge rate recently?

    The published margin looks very high recently and the sustainability of the numbers — pre MAX issue — was open to question.

    How many tons of alu are in a B737 fuselage?

    Maybe they have brought the cost to to beer can levels after 52 years of practice?

    • Yep, also they have been seeking advanced payment wherever possible I understand. So we may be seeing an almost instant impact on the accounts as there is little slack. The Inventories are going to explode by something like $1bn+ per month of stop in finished goods alone. The income of $2bn a month will stop dead. I reckon there will be some pretty significant provisions to made against future costs on a whole range of issues. Don’t know where Boeings financials are at present but this must have a significant and enduring impact.

      Maybe they could get a bit of cash in by renting out Renton for A220 production, the term Schadenfreude could have been coined for this one.

      • This would be really funny if not for the deaths involved.

        The one way to kill your business model is to kill passengers and that is just what they did.

  35. I would expect a background check of how hard the MCAS system has to work to control flight stability to be undertaken. A random check of FDR readouts could be interesting.
    My personal view is that a hardware solution will be mandated.

  36. I believe a background check of how hard the MCAS system has to work to control flight stability will be undertaken. A random check of FDR readouts could be interesting.
    My personal view is that a hardware solution will be mandated

  37. The so called Review Board has some odd players on it vs a real review borad.

    Duke Energy: Aren’t they the ones that let the damn blow out and dump all that Coal slag into a river? Maybe its a group of we screwed up so we know how to do it?

    “Members of Boeing’s new safety oversight committee include former vice-chair of the US Joint Chiefs of Staff Edmund Giambastiani, biotechnology company Amgen chief executive Robert Bradway, Duke Energy Corporation chief executive Lynn Good and former Allstate Corporation chief executive Edward Liddy, Boeing says.”

    None of the names pop up as anything special

    • Well I guess they could have hired BP Supervisor from the Maconda oil platform blowout. . He could tell you a lot about how not to do things.

    • Do they need anyone special? Half of us here seem to be sure of the right way to proceed 🙂

    • Muilenberg must be tone deaf.

      I would have been more impressed with a choice like Sully Sullenberger.

      • Good one, very very very good one.

        I am so down in the weeds with bad I forget there are rays of sunshine.

  38. Everyone agrees that airbus won’t profit as they have a full orderbook


    – the suppliers that run behind on engine deliveries could start delivering on time?
    – the a320 production capacity increase due this summer could go smoothly?

    • There’s no question that all parties involved are having conferences in which they discuss what consequences they have to expect. For P&W really nothing much has changed, except that maybe a production hike for the A220 is being discussed. For CFM the reduced production of the 737 means they need to reduce production of the LEAP-1B and may increase production of the Leap-1A by the same number without much trouble. This is certainly being discussed with Airbus right now.

      I have little doubt that Airbus and their supplier are looking seriously into how far and how fast they can grow production of the A320 AND A220 family. Not only would it be stupid not to profit from such a weakness the direct competitor, but I’m sure they receive plenty of inquries from airlines around the globe.

  39. Cutting corners in the name of short-term profits (or to fund obscenely large stock buybacks at the expense of investing in the company’s long-term future viability) works – until it doesn’t.

    Time will tell if Boeing will be able to completely re-establish the 737MAX as a viable single aisle aircraft in the market as originally envisaged, or if passengers and airlines never fully regain confidence in the model with orders canceled in the near-term, and Airbus even further increasing its dominance in the mainline single aisle space.

    Of course, that’s assuming no other problems emerge while the aircraft is grounded, and a smooth re-entry into service after regulators around the world (re)certify it for revenue service.

    As it is, one wonders what the prognosis is for longer-term residual values for a product that will have a steep hill to climb to overcome perceptions that it may be an inferior product even under ordinary circumstances where inevitably every incident no matter how trivial, will likely face intense media coverage in the coming years.

    And all bets are off if a 3rd one goes down during the next few years even if the cause is later determined to be completely unrelated to the current MCAS issues as it’s hard to imagine another “Mulligan” could save the program.

    Truth is, there’s only so much lipstick one can put on a pig before it wears off and there’s only so many times and so many different ways the lipstick can be reapplies when it wears off and the wrinkles on the pig are seen again.

    And with designs and engineering dating back well more than 50 years, more and more the folly of pushing the 737 “to the MAX” as a cheap and expedient remedy to thwart American Airlines’ from going all Airbus for its narrow-body fleet replacement when its upgraded Neo’s emerged appears to have been proof of the classic cliche, “penny wise, but pound foolish.”

    In just the past few recent years (2015-present) Boeing has cumulatively authorized approximately $72 billion for share buybacks.

    Even if an all new, clean sheet 21st century narrow-body cost $20 billion to bring to market (just a rough number to illustrate a point here – I’ll leave it to experts like Scott and Bjorn to better define the cost of bringing a new narrow-body aircraft to market), that still would’ve left at least $50 billion or so on the table for share buybacks.

    With the entire program just one more crash away from imploding, Boeing and its shareholders have a lot on the line – and they may yet still come to regret betting the company on a strategy (similar to what McDonnell Douglas did for its DC-9s and DC-10s before that company failed) that relied on pushing an aircraft whose platform dates back to the dawn of the Jet age “to the MAX”.

    Time will tell, I guess.

    But suddenly those shortcuts taken by relying on “one more generation” of 737s beyond the last, “Next Generation” that entered service 2-decades ago for short-term record profits and blowout share buybacks instead of developing an all new model sure do loom large.

    • “fund obscenely large stock buybacks at the expense of investing in the company’s long-term future viability”

      They do invest in new development, and out of cash flow. Buy backs should be seen as just another form of dividend payment. The only problem would be if they are funding the buybacks by increasing borrowing like some big companies do, but no evidence they are doing that. They really do have a lot of spare cash.

      The US should change its taxation system so that dividends arent taxed twice once they end up in shareholders hands. Other countries use a tax credits scheme which are very useful for companies which pay a lot of tax and decent dividends as well.

    • I see the preference of buybacks over further product investment as a sign of a company that has lost its nerve.
      Of course BA has continued to invest in development, and on the flip side, there is no reason for BA not to throw off some of the considerable cash it generates.
      But Boeing has become too conservative/risk averse about new product development, and ironically generated company risk by pinching costs and pushing timelines on the MAX.
      They took a market risk by dismissing the Neo, yet they won’t likely risk on a NMA in time.
      Hence my claim BA have lost their nerve.

  40. The possible ultimate root cause of Boeing’s dilema: the GTF. imagine if MHI hadn’t chosen the GTF. Would we have ended up with the much delayed all-new Boeing narrow-body instead of the MAX?

  41. Airbus won’t profit from this immediately, but am sure there is some ‘wargaming’ going on at the moment, second guessing Boeing’s next move.

    How does this effect the MoM, or indeed the Max replacement? Certainly one would think this delays any decision on the M0M whilst problems are ironed out. Does it bring forward the Max replacement?

  42. Airbus strategists may well be seen throwing dice differently : they perfectly well know that further ramping up the A32X lines only serves to deepen themselves into an increasingly inestricable future headache with the phase in/phase out of their own eventual next generation NSA vs A32X Series. The threats are social workforce crisis combined with order book massive reports over to NSA with pricing pressure on A32X Series (provided Boeing correctly manages their own side of the chessboard ?).

    With Boeing in a squeeze as is presently the case, isn’t this a perfect timing for AIRBUS (and not Boeing !) to kick off their own new generation single aisle adventure ? Boeing will be stuck with sorting out their mess, few customers will be tempted to accept MAX waiting for Airbus’ NSA ramp-up and any Boeing projected counter-NSA would be met with reserved enthusiasm if not mitigated suspicion … I personally see Boeing’s recent ramping down drastically the MAX lines as a move in protection of their own workforce, having anticipated a possible near-term announcement by Airbus along the lines of the abovementioned strategy ?

  43. I don’t understand the slight reduction in production unless it is simply being used to flush existing inventory out of the system. If the MAX is toast then stopping the process as soon as possible must be the aim and if the MAX is going to be fine then why slow down production at all? After all there is sufficient desert to park them in until they are needed.

    My guess is that Boeing are concerned that there will be a need for physical changes to be made to the aircraft at the very least and/or a very significant delay of 6+ months

  44. Updating my comments posted yesterday:

    Hong Kong based China Aircraft Leasing Holdings Corp., announced today that it’s suspending payments on its order for up to 100 Boeing 737 MAXes until “it is assured of the aircraft’s safety” per an article published by South China Morning Post a little more than 1-hour ago.

    The order is valued at $5.8 billion at list price for the first 50 originally ordered in June, 2017, according to the SCMP article.

    The Chairman of CALC, Chen Shuang, is quoted as stating, “the purchase has been suspended and we have stopped paying installments.”

    Of course, CALC, which is controlled by state-run China Everbright Group where Shuang is also CEO, may also be posturing to gain concessions from Boeing, or to better allow for China to further exploit the diminishing prestige and global reputation of our country’s formerly revered FAA after it delegated critical elements of certifying the 737 MAX to Boeing for “self-certifying” and its grounding of the aircraft only after it was grounded around the world.

    However, the fact remains that the costs to Boeing in terms of hard dollars and brand equity are emerging now – and anything less than flawless execution of finding a permanent fix that then holds up for a very long time after the aircraft returns to service could result in a perception of an inferior product versus its rival, Airbus, and its A320neo family, with permanently impaired residual values, lost sales campaigns, and those that are won from skittish buyers whom like CALC may be doing already, seeking discounts as a hedge against any collapse in value the aircraft will surely suffer for anything less than a flawless performance for many years to come.

    Indeed, the possibility of Boeing’s 737 MAXes becoming permanently scarred in the flying public’s mind the same way McDonnell Douglas’s DC-10s did for a decade or more after several crashes during its early years looms large.

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