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Boeing CEO raises possibility of pausing MAX production

Published:Thursday | July 25, 2019 | 12:31 AM

Boeing’s CEO says the company will consider temporarily shutting down production of the 737 Max if the plane’s return is significantly delayed beyond the company’s October forecast.

The comment by Chairman and CEO Dennis Muilenburg underscores the uncertainty swirling around the company and its bestselling plane, which has been grounded since March after two deadly crashes.

Boeing reported Wednesday that it suffered a second-quarter loss of nearly US$3 billion as it absorbed financial damage caused by the Max. Revenue plunged 35 per cent after Boeing halted deliveries of any new Max jets.

The huge loss was expected. Boeing removed much of the suspense from earnings day when it announced last week that it would take a US$4.9-billion after-tax charge for the Max. The charge was calculated from Boeing’s estimate of the cost of compensating airlines for lost use of their Max planes for several months. It did not include Boeing’s potential liability from dozens of lawsuits filed by relatives of the 346 passengers who died in the two crashes.

Boeing is updating United States and foreign regulators daily on its work to fix the plane. Based on those discussions, the company said last week that it expects the Max to resume flying early in the fourth quarter.

The Max assembly line near Seattle has stayed open, although at a reduced rate. The company even hopes to boost production gradually from the current 42 a month to 57 a month next year, but that assumes the plane will fly and Boeing will soon resume deliveries to airlines – jets have been piling up in Boeing lots since March.

“If that estimate of (an October) return to service substantially changes, then we’ll have to consider alternatives,” Muilenburg told analysts. “Those alternatives could include different production rates, they could include a temporary shutdown of the line.”

Muilenburg’s comments implied that the US Federal Aviation Administration, FAA, can review the company’s changes to flight-control software in one month. The FAA did not immediately comment, but agency officials in the past have declined to put a timetable on their work.

Chicago-based Boeing Company, which builds planes in Washington state and South Carolina, said it lost US$2.94 billion in the quarter, compared with a profit of US$2.2 billion a year earlier. It reported an adjusted loss of US$5.82 per share.

Revenue tumbled to US$15.75 billion from US$24.26 billion a year earlier.

The huge charge for the Max caused the quarterly numbers to mean less than usual. Some analysts excluded the charge from their forecast of earnings per share, while others did not, making it difficult if not impossible to judge whether Boeing met, beat or fell short of Wall Street expectations.

Boeing is working to complete changes in flight-control software on the 737 Max that was implicated in the fatal crashes. The company said it is testing the final software changes that it will submit to the FAA for approval.