Boeing faces scrutiny after mid-air blowout
January 7, 2024 – 7:22 PM EST
WASHINGTON (Reuters) – Boeing, the renowned jetmaker, finds itself back in the regulatory spotlight after a mid-air blowout, just as it was awaiting approval for its new models of the popular MAX jet. This unexpected setback has put investors and management on edge.
According to investigators, it is still too early to determine the cause of the incident involving an Alaska Airlines aircraft, one of Boeing’s loyal customers, which had 171 passengers on board when a door plug fell off. The Federal Aviation Administration (FAA) has decided to ground all 171 Boeing MAX 9 airplanes until they are convinced of their safety.
This blowout comes at a challenging time for Boeing and its supplier Spirit AeroSystems. Both companies are already dealing with production setbacks that have hindered their recovery from the previous 737 MAX safety grounding and the ongoing disruptions caused by the pandemic.
Boeing has been under immense pressure to expand its MAX portfolio and close the gap with its competitor Airbus. The two fatal crashes involving Boeing MAX jets in 2018 and 2019 resulted in a worldwide grounding of the aircraft for 20 months and a significant loss of market share for Boeing. The MAX’s troubled history led to major reforms in U.S. airplane regulation in 2020, and this recent incident could prompt regulators to take an even stricter stance on other outstanding issues.
Airlines are increasingly seeking single-aisle aircraft that can accommodate more passengers, offering improved performance and range at a lower cost. Boeing’s MAX 9, its largest narrowbody, has faced disappointing sales, and the company was banking on its new proposal, the MAX 10, to compete with Airbus’s A321neo. A successful rollout of the MAX line-up is crucial for Boeing to maintain or improve its roughly 40% market share and generate sufficient cash flow for the next decade.
With $39 billion in debt, Boeing has been cautious about investing in an all-new plane until engine technology advances in the coming years. However, any delays in the certification of the MAX 10 could put Boeing’s strategy for the 2020s under renewed pressure.
Boeing’s challenges are also being closely watched by China, a key market that has been largely closed to the company due to safety concerns and trade tensions. Chinese officials have already sought updates on the Alaska incident.
Since the grounding of the 737 MAX in 2019, Boeing’s shares have plummeted by over 40%, while Airbus’s shares have seen a 25% increase.
The fallout from this incident will likely depend on how regulators handle the certification of the MAX 7, the smallest and least-sold version of the aircraft. The FAA is currently evaluating whether to grant an exemption for the MAX 7’s certification before Boeing completes necessary design changes. Former U.S. air crash investigator Jeff Guzzetti believes that the MAX 9 accident could sway regulators towards rejecting the exemption, as they strive to prioritize safety.
Experts suggest that the investigation into the blowout could reignite concerns about recent quality issues in Boeing’s production process. If a production problem is found to be the cause of the panel dislodging, it would raise questions about the company’s ability to address ongoing production deficiencies and quality escapes.
Boeing’s manufacturing line for the 737 has evolved, but it was never designed to handle the production of 750 aircraft per year. The company has introduced robotic systems and plans for further digital reforms in future programs to compete with Airbus. However, supply chain and labor issues, as well as past initiatives that prioritized cost-cutting over quality, have added to Boeing’s difficulties.
Recent setbacks in 737 production include hardware issues with the rudder system of two MAX jets, improperly drilled holes by supplier Spirit, and incorrect attachment of brackets. In addition, Boeing had to pause 787 Dreamliner deliveries in February due to a data analysis error, unrelated to previous delivery stoppages.
Despite these challenges, Boeing remains optimistic about its production system and its ability to increase efficiency. CEO Dave Calhoun has emphasized the importance of maintaining a steady pace and ensuring alignment with the supply base.
Reporting by Valerie Insinna in Washington and Tim Hepher in Paris; Editing by Sandra Maler
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How might regulators respond to the blowout incident, and what implications could this have for Boeing’s future operations
Boeing Faces Regulatory Spotlight After Mid-Air Blowout
January 7, 2024 – 7:22 PM EST
WASHINGTON (Reuters) – Boeing, the renowned jetmaker, finds itself back in the regulatory spotlight after a mid-air blowout, just as it was awaiting approval for its new models of the popular MAX jet. This unexpected setback has put investors and management on edge.
According to investigators, it is still too early to determine the cause of the incident involving an Alaska Airlines aircraft, one of Boeing’s loyal customers, which had 171 passengers onboard when a door plug fell off. The Federal Aviation Administration (FAA) has decided to ground all 171 Boeing MAX 9 airplanes until they are convinced of their safety.
This blowout comes at a challenging time for Boeing and its supplier Spirit AeroSystems. Both companies are already dealing with production setbacks that have hindered their recovery from the previous 737 MAX safety grounding and the ongoing disruptions caused by the pandemic.
Boeing has been under immense pressure to expand its MAX portfolio and close the gap with its competitor Airbus. The two fatal crashes involving Boeing MAX jets in 2018 and 2019 resulted in a worldwide grounding of the aircraft for 20 months and a significant loss of market share for Boeing. The MAX’s troubled history led to major reforms in U.S. airplane regulation in 2020, and this recent incident could prompt regulators to take an even stricter stance on other outstanding issues.
Airlines are increasingly seeking single-aisle aircraft that can accommodate more passengers, offering improved performance and range at a lower cost. Boeing’s MAX 9, its largest narrowbody, has faced disappointing sales, and the company was banking on its new proposal, the MAX 10, to compete with Airbus’s A321neo. A successful rollout of the MAX line-up is crucial for Boeing to maintain or improve its roughly 40% market share and generate sufficient cash flow for the next decade.
With $39 billion in debt, Boeing has been cautious about investing in an all-new plane until engine technology advances in the coming years. However, any delays in the certification of the MAX 10 could put Boeing’s strategy for the 2020s under renewed pressure.
Boeing’s challenges are also being closely watched by China, a key market that has been largely closed to the company due to safety concerns and trade tensions. Chinese officials have already sought updates on the Alaska incident.
Since the grounding of the 737 MAX in 2019, Boeing’s shares have plummeted by over 40%, while Airbus’s shares have seen a 25% increase.
The fallout from this incident will likely depend on how regulators handle the certification of the MAX 7, the smallest and least-sold version of the aircraft. The FAA is currently evaluating whether to grant an exemption for the MAX 7’s certification before Boeing completes necessary design changes. Former U.S. air crash investigator Jeff Guzzetti believes that the MAX 9 accident could sway regulators towards rejecting the exemption, as they strive to prioritize safety.
Experts suggest that the investigation into the blowout could reignite concerns about recent quality issues in Boeing’s production process. If a production problem is found to be the cause of the panel dislodging, it would raise questions about the company’s ability to address ongoing production deficiencies and quality escapes.
Boeing’s manufacturing line for the 737 has evolved, but it was never designed to handle the production of 750 aircraft per year. The company has introduced robotic systems and plans for further digital reforms in future programs to compete with Airbus. However, supply chain and labor issues, as well as past initiatives that prioritized cost-cutting over quality, have added to Boeing’s difficulties.
Recent setbacks in 737 production include hardware issues with the rudder system of two MAX jets, improperly drilled holes by supplier Spirit, and incorrect attachment of brackets. In addition, Boeing had to pause 787 Dreamliner deliveries in February due to a data analysis error, unrelated to previous delivery stoppages.
Despite these challenges, Boeing remains optimistic about its production system and its ability to increase efficiency. CEO Dave Calhoun has emphasized the importance of maintaining a steady pace and ensuring alignment with the supply base.
Reporting by [Author]
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