Boeing Co is considering suspending or cutting back production of its grounded 737 MAX aircraft after the US Federal Aviation Administration (FAA) said last week it would not approve the plane’s return to service before 2020, Reuters and the Wall Street Journal (WSJ) reported.
The board of the largest US planemaker is holding a regular two-day meeting in Chicago, which started on Sunday, and the company could make an announcement on production plans as soon as late on Monday, a person familiar with the matter told Reuters.
The best-selling Boeing plane has been grounded since March after two fatal crashes in Indonesia and Ethiopia that killed 346 people.
Boeing’s management increasingly sees pausing production as the most viable option after the FAA’s announcement derailed the company’s expectation that the 737 MAX would be allowed to fly again by year-end, WSJ cited sources as saying.
Reuters was also told that a temporary shutdown is more likely than another production cut, but it would potentially take a few weeks before production could be halted.
Boeing said in a statement on Sunday the company “will continue to assess production decisions based on the timing and conditions of return to service, which will be based on regulatory approvals and may vary by jurisdiction.”
Any MAX production changes could carry significant implications for the US economy. Boeing’s inability to deliver the aircraft during the prolonged grounding has already weighed on the nation’s trade deficit.
Boeing has already taken a $3.6bn charge to cover additional production costs and has set aside $6.1bn for customer compensation.
The company cut production of the 737 MAX by a fifth in April and shelved plans to boost output in mid-2019, forcing suppliers to adjust their own plans to deliver parts and supplies for a backlog of more than 4,500 orders for the jet.
A source told WSJ that no immediate employee layoffs are anticipated, because of the previously scheduled closing of the 737 assembly plant in Renton, Washington, for the Christmas and New Year’s holidays. The holiday break typically lasts about two weeks.
Discussions by Boeing’s board have taken on more urgency following a meeting last week between Chief Executive Dennis Muilenburg and FAA Administrator Steve Dickson, which changed the timetable for certification of the 737 MAX to February 2020 or beyond, the WSJ reported.
Dickson said on Wednesday there are nearly a dozen milestones that must be completed before the MAX returns to service.
The regulatory chief told Muilenburg, according to an email sent to legislators by the FAA, that “Boeing’s focus should be on the quality and timeliness of data submittals for FAA review. [Dickson] made clear that FAA’s certification requirements must be 100 percent complete before return to service,” Reuters reported.
Boeing had said last month it expected the FAA would allow it to resume 737 MAX deliveries in December.
But the FAA reportedly told congressional staff in an email last week Dickson is “concerned that Boeing continues to pursue a return-to-service schedule that is not realistic… More concerning, the administrator wants to directly address the perception that some of Boeing’s public statements have been designed to force FAA into taking quicker action.”
The troubled planemaker has said that if it did not receive approval to begin deliveries before the end of the year it could be forced to further slow production or temporarily shut down the MAX production line, a move that would have repercussions across its global supply chain.