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Without Safety Approval, Boeing Freezes Production of 737 MAX Jet
Aerospace company Boeing's announcement that it is suspending production of the 737 MAX passenger jet is affecting more than just the business's financial results.
Thousands of employees and hundreds of suppliers are also facing an unclear future with the production freeze – Boeing's biggest in 20 years.
Boeing builds the 737 MAX in Seattle, Washington. About 12,000 employees are involved in making the airplane. The company said it would not lay off employees during the production freeze. However, the move will affect a supply chain of up to 900 companies in the U.S. and overseas that make parts for the complex jet.
Boeing's board of directors made the decision Monday after a two-day meeting. Last week, the Federal Aviation Administration (FAA) did not approve the 737's return to service before 2020.
The 737 MAX passenger airplane has been banned from flying since March, shortly after a second deadly crash involving the aircraft took place near Addis Ababa, Ethiopia. Five months earlier, one of the jets crashed after taking off from Jakarta, Indonesia. A total of 346 people died in the two incidents.
The crashes caused an international outcry against Boeing and many questioned the companies' support for safety policies. Pilots reportedly had expressed concerns about one of the flight control systems on the plane. It caused the aircraft lose altitude under some conditions.
Boeing has made changes to the airplane's software and proposed upgrading pilot training. But the changes are still being studied by flight safety officials.
The Federal Aviation Administration would not comment on what it described as Boeing's business decision. It said it would continue to work with safety officials around the world to study the proposed changes to the 737 MAX.
"Our first priority is safety, and we have set no timeframe for when the work will be completed," the agency said.
The production freeze signals a deepening of the crisis for Boeing. U.S. Representative Rick Larsen called the decision "a body blow to its workers and the region's economy." The lawmaker, however, praised Boeing's promise not to lay off workers.
Before Monday, Boeing had not stopped production of the 737 MAX during the months-long grounding. The company said that it had about 400 airplanes in storage waiting to be sent to buyers.
It is estimated that the grounding has cost Boeing about $9 billion so far and about $1 billion each additional month.
Boeing's production halt also affects suppliers like Spirit AeroSystems Holdings Inc, based in Wichita, Kansas. Fifty-percent of the company's sales are based on the 737 MAX. Other companies that supply parts to Boeing are Britain's Senior Plc and France's Safran SA. The French company partners with General Electric to make the planes' engines.
Many suppliers have seen their stock prices suffer as a result of the production halt. They may have to pull back their own production targets because of reduced demand.
In addition to suppliers, some airlines continue to cancel flights because the 737 MAX cannot fly. Southwest Airlines has extended cancellations for another five weeks through April 13 because it is unclear when the plane will return to service.
Richard Aboulafia, an aircraft industry expert with the Teal Group, spoke to the Associated Press. He said the freeze would probably affect the economy and could worsen what experts sometimes call the country's trade deficit.
"This is the country's biggest single manufactured export product," Aboulafia noted.
I'm Mario Ritter, Jr.
