The Boeing 737 MAX series models face new challenges.
On January 24th local time, the Federal Aviation Administration (FAA) of the United States (FAA) announced that after conducting an investigation and strengthening supervision of Boeing and its suppliers, it has notified Boeing that it will not approve any expansion of the 737 MAX series aircraft, including the 737 MAX 9.
Federal Aviation Administration Director Mike Whitaker stated, "Boeing's business will not return to normal. Until quality control issues are resolved, FAA will not agree to Boeing's request to expand production or approve the addition of the 737MAX production line."
Perhaps influenced by the above news, Boeing's stock price fell by more than 1% in post market trading.
FAA restricts the expansion of 737 MAX production, and some airlines plan to resume operation of some aircraft
On January 5th of this year, an Alaska Airlines Boeing 737 MAX 9 aircraft flew from Portland to Ontario, California on the same day. The cabin door fell off during the flight, causing the aircraft to make an emergency landing. Subsequently, the FAA ordered the grounding and inspection of 171 Boeing 737 MAX 9 aircraft worldwide.
The FAA stated in its latest announcement that the 737 MAX 9 incident on January 5th must not happen again. Therefore, the FAA announced additional actions to ensure the safety of each aircraft. On the 24th, the FAA also approved a thorough inspection and maintenance procedure for 171 Boeing 737 MAX 9 aircraft that must be grounded. After completion, the door bolts on the 737 MAX 9 will comply with the original design, and the aircraft will be eligible to resume operational services.
The latest announcement from the FAA shows that after grounding Boeing 737 MAX 9 aircraft in early January, the FAA has taken a series of actions to strengthen supervision of Boeing's production lines, including limiting the expansion of new Boeing 737 MAX aircraft; Initiate an investigation to review whether Boeing complies with manufacturing requirements; Closely monitor data to identify risks, and so on.
The FAA also stated that the Boeing safety culture review report is currently in progress. In early 2023, the FAA convened 24 experts to review Boeing's safety management processes and how they affect Boeing's safety culture. The FAA is expected to release a report within a few weeks.
It is worth noting that Alaska Airlines announced on January 24th local time that the first 737 MAX9 will resume flight on January 26th. With inspections completed and each aircraft considered airworthy, more aircraft will be added every day, and it is expected that all 737 MAX 9 inspections will be completed next week. According to foreign media reports, United Airlines also announced on January 24th that it has received final approval from the FAA and will resume regular operational services for the 737 MAX 9 starting from January 26th.
What are the impacts of production expansion restrictions on Boeing and the industry?
The announcement from the FAA does not specify the time limit for production expansion or specify the number of aircraft that Boeing can produce per month, but ultimately means that Boeing will temporarily be unable to increase production as planned.
With the increasing demand for travel after the epidemic, the demand for airlines to expand their fleet size is also becoming increasingly strong. Boeing and Airbus both plan to accelerate the production capacity of best-selling aircraft models, but are affected by some supply chain shortages.
Foreign media have pointed out that the FAA's decision to prevent Boeing from expanding production will have a wide-ranging impact on the entire industry. Foreign media analysis also suggests that the FAA decision may affect the new 737 MAX production line this year.
It is reported that in January last year, Boeing executives announced plans to add a fourth 737 MAX production line in the second half of 2024 to increase the production of this aircraft. The new production line will be located at Boeing's large factory in Everett, Washington, USA.
The 737 series aircraft is Boeing's best-selling narrow body model, while the Boeing 737MAX series aircraft is Boeing's latest single aisle aircraft family, with specific models including 737-7, 737-8, 737-9, 737-10, etc., using CFM's LEAP-1B engine.
As a best-selling model, the 737MAX model has experienced frequent accidents in recent years. From October 2018 to March 2019, a Boeing 737 MAX 8 aircraft experienced two crashes with Lion Air Indonesia and Ethiopian Airlines within five months, resulting in a total of 346 deaths. The model subsequently grounded globally for nearly two years and obtained a go around permit from the United States in November 2020.
However, it should be noted that the Boeing 737 MAX aircraft involved in the previous air crash was the 737 MAX 8, while Alaska Airlines had the 737 MAX 9 aircraft involved in this accident, which is not the same aircraft. According to foreign media reports, the air crash crisis caused Boeing to lose $20.7 billion.
Due to previous safety accidents, Boeing has gradually fallen behind Airbus in the competition for best-selling aircraft models in the past two years. In terms of delivery volume, according to a reporter from Pengpai News, Boeing delivered 528 commercial aircraft and 396 Boeing 737 passenger planes throughout the year last year, which did not meet previous expectations. Airbus delivered 735 commercial aircraft last year, and the best-selling narrow body model 320 series delivered 571.
Previously, Boeing stated in its 2023 semi annual report that it plans to increase its production of 737 aircraft from 31 to 38 per month, and plans to reach 50 per month between 2025 and 2026. It is still expected to deliver 400 to 450 737 aircraft in 2023.
According to analysts cited by foreign media, there are concerns that additional inspections of Boeing's factory after the door detachment incident during the 737 MAX 9 flight will hinder the production growth of the MAX 8. The smaller size and best-selling MAX 8 is the main source of revenue for Boeing and many suppliers.
It is worth noting that Boeing's production cannot increase as planned or further affect the airline's operational recovery. United Airlines stated in its recent Q4 financial report that the continuous suspension of the 737 MAX 9 will result in losses in the first quarter of this year. The CEO of United Airlines recently expressed disappointment with Boeing's issues and stated that they may seek future aircraft purchases from other aircraft manufacturers. It should be noted that the United Airlines fleet has 79 737 Max 9 aircraft, more than any other airline.
The CEO of Boeing's commercial aircraft division recently stated that a comprehensive plan is being implemented to safely restore these aircraft to service and improve Boeing's quality and delivery efficiency.
Will the temporary restriction on Boeing's production expansion have a significant impact on the Chinese market? It is understood that there are currently no operating 737-9 aircraft models in China's domestic airlines, and all operating 737 MAX aircraft are 737 MAX 8. According to data provided by the third-party travel data app "Flight Manager" to a reporter from Pengpai News, domestic airlines currently have a total of 95 Boeing 737 MAX 8 fleets.
After two Boeing air accidents, the Civil Aviation Administration of China announced in March 2019 that the 737 MAX would be grounded. During this period, Boeing did not deliver any 737 MAX aircraft to Chinese customers. In September 2022, Boeing also announced plans to resell some of the 737 MAX originally planned to be delivered to China. It is worth noting that at the end of last year, all 737 MAX series models resumed operation in China and are waiting for further resumption of delivery work.
According to Global Times, at the regular press conference of the Ministry of Foreign Affairs on January 25th, a reporter asked that on January 24th, Boeing delivered a Boeing 737 MAX aircraft to China Southern Airlines in Seattle, marking the first time since March 2019 that Boeing has delivered a 737 MAX model to a Chinese airline. Why does China still need to resume delivery when Boeing aircraft safety is under such strict scrutiny? Regarding this, Chinese Foreign Ministry spokesperson Wang Wenbin stated that the specific behaviors between enterprises you mentioned suggest that you inquire with relevant enterprises. What I can disclose to everyone here is that on December 8, 2023, the Chinese regulatory authority completed the design approval work for the Boeing 737 MAX 8 in accordance with the regulations of the Chinese Civil Aviation Administration, and the aircraft meets the delivery conditions.