Boeing Co is considering temporarily halting production of the 737 MAX as regulatory clearance for the grounded jet’s return looks increasingly likely to slip beyond next month, a person familiar with the matter said.
While the company’s board is also studying another slowdown in output for its best-selling jet, executives are convinced that a temporary pause would be less disruptive, said the person, who asked not to be identified, as the discussions are confidential.
The Wall Street Journal earlier reported that the production plans have become more urgent, as the US Federal Aviation Administration (FAA) signaled it would not certify the revamped MAX this year.
A decision could come as soon as yesterday as Boeing’s directors reviewed the manufacturing plans for the 737 program, the company’s biggest source of cash, as part of a regularly scheduled board meeting.
During the session, the board traditionally sets the company’s dividend for the coming year and decides on its share repurchases, which have been suspended while Boeing deals with the crisis prompted by the unprecedented grounding.
“We continue to work closely with the FAA and global regulators towards certification and the safe return to service of the MAX,” Boeing said in an e-mail. “We 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.”
The Chicago-based plane maker has drafted contingency plans for a variety of scenarios as the MAX’s global grounding stretches to more than nine months following two fatal crashes that killed 346 people.
Boeing slashed 737 production by 19 percent in the weeks following the March tragedy.
Meanwhile, inventory costs have ballooned to record levels as the company’s factory in Renton, Washington, continued to churn out 42 of the jets a month.
As the company is not allowed to deliver the aircraft while the flying ban remains in place, Boeing has placed more than 380 newly built planes in storage, according to a tally by 737 production blogger Chris Edwards.
The build-up would continue if production were slowed rather than halted.
“They are doing the sensible thing by halting or putting a pause on the production line,” said Shukor Yusof, founder of aviation consulting firm Endau Analytics. “Cash burn has been bad.”
Boeing’s board met after a bruising week for the aerospace giant.
In a sign of growing rancor between the company and the US regulator, FAA Administrator Steve Dickson in a meeting on Thursday chastised Boeing chief executive officer Dennis Muilenburg for pursuing an unrealistic schedule for the MAX’s return to service.
The FAA said it was worried by a perception that Boeing was pressuring regulators to take action.
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