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Boeing Throws Up the White Flag on 737 Max

Bill Koenig
By Bill Koenig Senior Editor, SME Media

COMMENTARY

Boeing Co., which had wanted to return the 737 Max to service this month, threw up the surrender flag on Dec. 16.

The Chicago-based aircraft maker said it wasn’t going to meet that target.

Instead, the company said in a statement it will suspend 737 production “beginning next month.”

Boeing said its third-quarter financial report “has assumed that regulatory approval of the 737 Max return to service begins in the fourth quarter of 2019 and that it will gradually increase the 737 production rate from 42 per month to 57 per month by late 2020.”

The aircraft maker has developed software fixes and training for the 737 Max. But after two fatal crashes that killed 346 people, regulators across the globe are proceeding cautiously before returning the aircraft to service.

The company announcement capped off a terrible year for Boeing.

CEO Dennis Muilenburg this fall was grilled by two Congressional panels. Both his and the company’s reputation were criticized, repeatedly and harshly.

“We believe this decision is least disruptive to maintaining long-term production system and supply chain health,” Boeing said in the statement. The company has about 400 737 Max aircraft in storage.

The company cited “the uncertainty about the timing and conditions of return to service and global training approvals.” Boeing said it would disclose the financial impact of the production suspension when it reports fourth-quarter financial results in late January.

Importance of 737 Max

The 737 Max remains one of Boeing’s most important products. Boeing customers, including carriers such as American Airlines and Southwest Airlines, depend on the 737 Max. Southwest said today it’s removing the 737 Max from its schedule through April 13. Southwest previously said the aircraft had been removed from its flight schedules through March 6. The move will cut about 300 weekday flights for Southwest.

The aircraft will ultimately have a huge impact on Boeing’. The way Boeing responds to the 737 Max crisis will establish Boeing’s reputation going forward.

For CEO Muilenburg, it will define his legacy. He’s a Boeing lifer. He’s not just a single executive. Muilenburg represents a generation of Boeing executives.

For now, Boeing says it won’t lay off workers because of its decision. It remains to be seen how long the output suspension (and lack of layoffs) will last.

Boeing is one of the most important industrial companies in the U.S. It represents a symbol of how well the U.S. can compete internationally.

The 737 Max represents a crisis for Boeing, one that will have a long-term impact on the company.

Boeing can still recover. But this week’s announcement shows that things aren’t going to Boeing’s plans. For Boeing, it’s another setback to overcome.

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