The fallout from the 737 MAX crashes, technical problems with the MCAS and the grounding is already profound but it’s far from clear how deep the impact to Boeing will be.
It’s now becoming clear, however, that the prospective New Midmarket Airplane is going to be affected by the MAX issues.
On the first quarter earnings call, Muilenburg began to walk back from previous pledges that ATO, if it comes, will be this year and entry into service (EIS) remains targeted for 2025.
“We’re continuing our work on [NMA] in parallel,” Muilenburg said on the call. “Certainly the higher priority, the highest priority for us, is the 737 MAX safe return to service, so we have prioritized our resources accordingly, while we continue to work on our NMA effort in parallel. We are still looking at that as a potential opportunity for a 2025 entry-into-service date. (Emphasis added.)
“We still have work to do before we get an authority to offer decision. We are still working on a pace to try to do that this year, as we’ve previously announced. But I want to be very clear that when it comes to resource questions and application of resources, our top priority is the safe return to service of the 737 MAX.” (Emphasis added.)
The ambiguity introduced by Muilenburg is a subtle shift in language. This appears to make it iffy Boeing will grant its sales force Authority to Offer the NMA for sale this year.
EIS in 2025 now appears to be a public question within Boeing.
LNA’s market intelligence from within Boeing indicated for a long time that 2025 was always an unrealistic date.
LNA, industry leaders and key suppliers believed a 2026-2027 EIS was more likely. LNA now is leaning toward 2027-2028, largely because of the continuing engine problems, resource strains and development challenges at the engine suppliers.
Rolls-Royce dropped out because it could not meet Boeing’s timeline, resource issues and stubborn problems with the Trent 1000.
The Seattle Times reported last Friday that Boeing and the FAA are moving toward lifting the grounding by late May or early June. The FAA scheduled a meeting May 23 with international regulators in what is believed to be a show-and-tell to convince them the FAA has it right this time for recertifying the MAX.
But, as The Times reported, it will take weeks to upload the software to all the nearly 400 grounded MAXes, train crews and pull planes out of storage, preparing them for flight.
The three US operators, American, United and Southwest, and Air Canada, removed the MAX from their schedules through July and into August.
It’s also unclear if global regulators will act at the same time as the FAA to lift the grounding. There may be a rolling return to service as a result.
The Boeing Board of Directors seems unlikely to act until most of the financial impact of the grounding and related costs to the company are clarified.
It may be years before the full financial impact will be known. Agreements with operators seeking compensation have to be negotiated. Compensation may take the form of cash, credits, discounts, services or other types.
Then the Board needs to be convinced Boeing Commercial Airplanes will get the next airplane right.
Two of the last four airplane programs (787, 737 MAX) have been grounded.
Three of the last four (787, 747-8 and KC-46A) were years late.
All four were billions of dollars over budget.
It’s understood that the Board as then constituted wasn’t willing to sign off on a brand new airplane program while the 787 and 747-8 programs were late and bleeding cash. This was in part a factor to the low-risk (it was thought), low-budget ($2bn) MAX.
The NMA, with a dicey business case that Boeing hasn’t been able to close, is as much about production (as one Boeing official once told LNA) as it is about the airplane.
The production moonshot intends to combine a litany of advanced manufacturing techniques that even now are being tested or have been implemented on existing 7-Series programs and the new 777X.
Market intelligence indicates that some progress is better than others, which in itself is not to be unexpected.
But combining all the advanced manufacturing elements into one airplane production line, for a reasonably high rate production, will be challenging.
LNA believes the Board of Directors, already faced with an iffy business case for the NMA, will be even more skeptical in the wake of the MAX events.