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Boeing Counts Cost of 737 Max Groundings, 737 Ramp-Down

The issues combined cost the aircraft manufacturing about $1 billion in the first quarter of this year.

The grounding of the 737 Max and Boeing’s subsequent reduction in 737 production from 52 to 42 aircraft per month cost the US manufacturer about $1 billion in the first quarter.

Much of that additional cost was due to Boeing’s decision to maintain headcount on the production line and not reduce its orders from certain suppliers. This means that it has the costs of 52 aircraft per week but not the income; Boeing delivered 50 fewer 737s in the first quarter than in the prior-year period.

Storing momentum on the 737 line is seen as crucial to a later recovery. Boeing is unwilling to adjust its 2019 guidance until there is more certainty about when the Max returns to service, but a key part of that recovery will be how quickly it can get aircraft out the door and how quickly customers can accept them.

The length of the grounding itself is also crucial and Boeing is trying to synchronize its recertification efforts with different regulatory authorities to ensure as smooth a return to service as possible.

“There are different paces and different processes in each country, but these are all running in parallel,” said Boeing chief executive Dennis Muilenburg.

“We're working with those authorities to try to align schedules, both from a regulatory government standpoint as well as the customers that are operating in these countries around the world.”

While Boeing’s focus on the Max is unsurprising, it has prompted questions about the implications for other aircraft programs.

Muilenburg told analysts that Boeing is still aiming to green light the proposed New Midsize Airplane (NMA) this year in anticipation of a 2025 entry into service, but emphasized that “when it comes to resource questions and application of resources, our top priority is the safe return to service of the 737 Max”.

TAGS: Airframe
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