Pontifications: “We own it, but…”

By Scott Hamilton

April 29, 2019, © Leeham News: Boeing got roundly thumped for blaming the pilots in the Lion Air flight 610 crash involving the 737 MAX last October.

It took months before Boeing CEO Dennis Muilenburg issued a video in which, among other things, he said, “We own it.” He was referring to safety of the MAX.

This was widely interpreted as Boeing stepping up and taking responsibility for at least some of the causes of the Lion Air and Ethiopian Airlines crashes.

Last Wednesday, he took it all back.

On the first quarter earnings call, Muilenburg denied there was any “technical slip or gap” in designing the now famous MCAS system. He said “actions not taken” contributed to the crash, a thinly veiled reference once again to pilot error. (More on this below.)

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Initial analyst reaction to Boeing 1Q earnings

April 24, 2019: Initial analyst reaction to Boeing’s 1Q2019 earnings, which were impacted by the grounding of the 737 MAX two weeks before the engine of the quarter, was positive.

Pre-market trading was initially up more than $6; at this writing an hour later, this eased, coming off slight to being up just under $6.

Here is the initial reaction from analysts:

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Boeing 1Q earnings down on MAX grounding; full impact to come

April 24, 2019, © Leeham News: Boeing took a $1bn revenue hit in the first quarter ended March 31, following the grounding of the 737 MAX on March 13.

Earnings from operations reported today were off $525m; net earnings were down $328m.

The press release is here.

The stock market took the news in stride; pre-market trading saw Boeing stock rise more than $6 (1.66%) an hour before opening.

The MAX was grounding March 13, affecting only two weeks of the first quarter. The full impact is to come. As a result, Boeing suspended guidance for the year and will reissue it at a later date.

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Latest engine problem means NMA EIS slides

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Introduction

April 22, 2019, © Leeham News: If there remains any doubt that Boeing’s prospective New Midmarket Airplane (NMA) won’t be ready for entry into service (EIS) by 2025, it should be dispelled by now.

The grounding of the 737 MAX March 13, which is likely to continue well into the summer, will delay any launch of the program—should Boeing proceed.

The Board of Directors is unlikely to approve Authority to Offer (ATO) the NMA for sale as long as the cash flow for the MAX is outgoing and not in-coming.

Although this has its own impact on the NMA timing, it’s not the critical factor.

Last week, it was revealed that the CFM LEAP engine on the MAX (and the Airbus A321neo) has a problem called coking, which led to the contained engine failure of a Southwest Airlines MAX being ferried from Orlando (FL) to Victorville (CA) for the grounding of the Boeing airplane (see here and here). It’s the latest in a long line of engine maker problems with their current generation of powerplants.

This issue is unrelated to the MAX MCAS grounding. It also affects some engines on the A320neo family.

Summary
  • CFM is considered the favorite to power the NMA.
  • All four engine makers remain under stress and recover modes.
  • Rolls-Royce dropped out of NMA competition in December.
  • LNA reported in March 2018 the engines needed to be the focus for the NMA launch. See here and here.

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Bjorn’s Corner: MCAS fix on the way

By Bjorn Fehrm

April 19, 2019, ©. Leeham News: Boeing’s CEO Dennis Muilenburg yesterday flew with the final version of the updated MCAS software on a 737 MAX. It will now enter certification flights, having completed 120 Boeing test flights.

Here my perspective on MCAS and the overall Boeing 737 safety record.

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Union asks Congress to intervene in Boeing inspection issue

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By Bryan Corliss

April 15, 2019, © Leeham News: As Boeing faces federal investigations, shareholder lawsuits, Congressional hearings – and possibly subpoenas – linked to the 737 MAX crashes, another issue flying low on the radar could further complicate the company’s relationship with the Federal Aviation Administration and the elected officials who oversee it.

The issue revolves around the company’s plan to end quality control inspections for several thousand tasks performed by Boeing mechanics in the factory.

That plan – first reported by The Seattle Times in January – involves the use of more “smart tools” to perform work more precisely so that inspections will no longer be required for thousands of tasks. Instead of doing quality checks 100% of the time, as Boeing inspectors have been doing for generations, inspectors will sample 1-in-100 tasks, or maybe less, Boeing executives told the newspaper.

Now, the union for inspectors whose work is going away is asking its influential supporters in Congress to intervene with the FAA. It wants a chance to show the agency data it says proves that the new process will lead to more downstream rework on the assembly line, more injured workers and more production delays.

Summary
  • Borrowing from the auto business
  • Union says bad decisions put deliveries at risk
  • Boeing says new system brings down defects
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Training is a factor in the MAX crashes

 

By Scott Hamilton

April 15, 2019, © Leeham News: This column will no doubt light up the blog-o-sphere.
There’s been a major debate going on since the crash of Lion Air JT610, the Boeing 737-8 MAX that immediately became a huge controversy.

Boeing immediately blamed the pilots. So did some pilots of some US airlines, who said if the Lion Air crew had just flown the airplane, it wouldn’t have crashed. It was a training issue, some said.

Having got tremendous blow back over Lion Air, Boeing publicly held its tongue when Ethiopian Airlines flight ET302 crashed five months later.

Still, Boeing officials quietly still said there was nothing wrong with the airplane.
Some US and Canadian pilots maintained, publicly and privately, that a lack of training and pilot skills in the Third World was responsible.

They’re not entirely wrong.

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From the sidelines at the MRO Americas conference

April 10, 2019, © Leeham News: China will be the last country to review and approve fixes to the Boeing 737 MAX, according to the talk here on the sidelines of the Aviation Week MRO Americas conference in Atlanta.

Nobody knows, of course, when regulators will lift the MAX grounding orders. But none is looking for fast action.

And China, the first to ground the airplane, will be the last to lift the grounding, sideline talk here indicates.

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Boeing stock price resilient since Lion Air accident

April 9, 2019 (c) Leeham News: Boeing stock price has been remarkably resilient since the Lion Air crash.

The 737-8 MAX was five months old and the type had been in service only since May 2017.

It took a big hit on Oct. 29, when Lion Air JT610 crashed, closing at $357 per share.

By early January, the stock price not only recovered its losses, it climbed back to $440 by Feb. 25, a record high.

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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.

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