Boeing cuts production of 737 MAX after crashes

by Garry Watts April 12, 2019, 2:24
Boeing cuts production of 737 MAX after crashes

American Airlines said Sunday, April 7, 2019 it is extending by over a month its cancellations of about 90 daily flights as the troubled 737 Max plane remains grounded by regulators. It said that now the bank estimates delays with the plane will last six to nine months, longer than the three- to six-month delay originally forecast.

Attorneys said Boeing failed to properly test its controversial Maneuvering Characteristics Augmentation System, which is believed to be the cause of the Ethiopian Airlines crash as well as a Lion Air crash in October previous year.

The fallout from Boeing's worst crisis in years still has no end in sight for airlines that operate the embattled 737 Max jet.

Boeing stock opened trade 4% lower today after the news surfaced.

The analyst said Boeing's suppliers can not dial down production overnight, and changes to aircraft production rates usually take 12-18 months to flow through the supply chain. Abdalla, a US citizen, was killed when Ethiopian Air Flight 302 crashed shortly after take-off on March 10.

Boeing's 737 Max planes were grounded indefinitely in the United States on March 13, 2019 after two of the planes had fatal crashes.

McAllister added that to ensure unintended MCAS activation will not occur again, Boeing has developed and released a software update to MCAS and an associated comprehensive pilot training and supplementary education program for the 737 MAX.

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The auto industry is particularly vulnerable to a border shutdown because it imports $59.4 billion worth of parts from Mexico. He said lawmakers must work on new laws to change the incentive structure that draws the flow of people from Central America.

"It's going to take a lot of teamwork and collaboration, but we're working closely with Boeing throughout this", Austin said.

"The CEO's statement strengthens claims by the victims' families for viable compensation from the plane maker", Kailimang said, since the apology means that Boeing implicitly accepts blame. The longer the grounding lasts, the more unlikely it is that suppliers will emerge from this debacle unscathed. There will be a hit to 2019 earnings due to fewer-than-anticipated deliveries.

"The reputational loss from these events could erode long-term market share and pricing power of the 737 MAX", BofA analyst Ronald Epstein said in a note to clients seen by CNBC.

Boeing's shares were down by around 2.7 per cent in pre-market trading. These announcements break with a tradition of accepting the certification of the company's home regulator, in this case the US Federal Aviation Administration.

"By proactively canceling these flights, we are able to provide better service to our customers with availability and rebooking options", the airline said in a statement.

Indonesian airline Garuda is the only company so far to publicly disclose it has cancelled an order for the planes.

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