Boeing Co on Monday said that it would temporarily suspend production of its globally grounded 737 MAX jets next month, as safety regulators delay the aircraft’s return to the skies after two crashes.
The decision confirmed investor fears that the company’s recovery from the crisis is dragging on longer and creating more uncertainty for Boeing than executives anticipated.
Boeing’s travails since March have weighed on the US economy, holding down US manufacturing output, trade and sales of durable goods, while damaging the company’s performance on Wall Street’s benchmark Dow Jones Industrial Average.
Photo: Reuters
The company said in a statement that it would continue to pay its workers, despite the temporary production stoppage, but the decision immediately raised questions regarding the future of parts suppliers that contribute to the jets’ manufacture.
“We have previously stated that we would continually evaluate our production plans should the MAX grounding continue longer than we expected,” the company said. “As a result of this ongoing evaluation, we have decided to prioritize the delivery of stored aircraft and temporarily suspend production on the 737 program beginning next month.”
The company said that it would focus on delivering 400 jets it has kept in storage.
Although the jets have been grounded worldwide since March following deadly crashes in Indonesia and Ethiopia, which left 346 people dead, Boeing had continued to produce 40 of the aircraft per month at a facility in Renton, Washington.
US aviation regulators last week issued the company an unusually sharp rebuke, accusing it of pursuing an “unrealistic” timeline for the MAX’s return to service and of making public statements intended to put pressure on federal authorities.
The Federal Aviation Administration on Wednesday said that it could not approve the jets’ return to service before next year, even though Boeing had long said that it planned to get officials’ green light before the end of this year.
Analysts have said that Boeing’s prospects would remain clouded until the company could get the all-clear for the MAX to fly again.
“As we have throughout the 737 MAX grounding, we will keep our customers, employees and supply chain top of mind as we continue to assess appropriate actions,” the company said, adding that it would disclose financial information tied to the suspension when it releases quarterly results late next month.
Major air carriers that had purchased 737 MAX jets have repeatedly pushed back the dates on which they anticipate a return to service.
Southwest Airlines Co yesterday said that it had reached a confidential agreement with Boeing partially compensating the airline for costs related to the grounding of the jets.
Shares in Boeing on Monday fell 4.3 percent as investors anticipated the airline’s decision. They were down another 0.4 percent in after-hours trading.
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