By Andrew Tangel and Ben Kesling
Boeing Co. suffered dual setbacks Thursday when it paused
deliveries of its 737 MAX jetliner and a U.S. Air Force official
raised concerns about one of the company's biggest military-plane
programs.
The world's No. 1 plane maker by deliveries said it has
suspended deliveries of its 737 MAX following the grounding of the
aircraft by aviation regulators around the world after two fatal
crashes within five months.
A spokesman for Boeing said it hadn't made any changes to its
737 production rate of 52 planes a month, but said the company
continues "to work through production decisions."
Boeing, the world's top plane maker in terms of deliveries, will
continue to build 737 MAX planes while assessing how capacity
constraints could affect the company's production system amid the
world-wide restrictions, according to the spokesman.
Shares in the company fell 1% Thursday to $373.30. The stock is
off 12% from $422.54 on Friday, before the fatal crash of an
Ethiopian Airlines 737 MAX on Sunday. The incident in Ethiopia
followed another fatal crash involving the same model plane,
operated by Lion Air, in Indonesia in October.
The stock's decline has erased $27.8 billion from Boeing's
market value since Friday.
Meanwhile, the black boxes from Ethiopian Airlines Flight 302
arrived in France early Thursday for analysis, a key step in a
probe that could help determine how long the 737 MAX jet remains
grounded around the world. The devices store key data, such as
flight parameters and cockpit voice recordings, which investigators
will unlock and read to help them determine the cause of the crash.
The French agency has extensive experience investigating
crashes.
Downloading the data is due to start Friday. Drawing early
conclusions can take only a few hours, though detailed analysis
typically can take months.
Data from the black boxes will be among the earliest and most
important findings that regulators and airlines will consider in
determining whether and when the jet should be allowed to fly
again. President Trump said Thursday, "I hope it's going to be for
a short period of time."
The new MAX model includes a stall-prevention system that has
come under scrutiny since the Lion Air crash. Authorities have said
preliminary data in the probe of the Ethiopian Airlines crash
suggested potential similarities between the two accidents.
Boeing has said it believes the jet is safe, but said it
eventually concurred with the decision by U.S. authorities to
ground the jet out of an "abundance of caution," according to a
written statement from Chief Executive Dennis Muilenburg. The U.S.
Federal Aviation Administration on Wednesday joined other
regulators in grounding the 737 MAX.
Regarding the deliveries pause, a person familiar with the
matter said constraints Boeing faces include places to park the
aircraft once the jets are built at the company's factory in
Renton, Wash.
The facility abuts a small airport, but parking is scarce so the
planes must be flown to nearby King County International Airport,
also known as Boeing Field, before delivery to customers.
It wasn't immediately clear how many 737 MAX planes Boeing could
store at the airfield. A spokesman for the airport's operator
didn't immediately respond to a request for comment Thursday about
how much additional parking space Boeing had at the airfield. But
the operator has said Boeing leases 106 acres there, mostly for its
737 program.
It wasn't immediately clear how many 737 MAX planes Boeing could
store at the airfield. A spokesman for the airport's operator
couldn't be reached on Thursday, but has previously said Boeing
leases 106 acres there, mostly for its 737 program.
Despite the FAA's grounding order, the agency has indicated it
would grant Boeing special permits to move the aircraft without
passengers onboard.
Boeing is investigating alternatives should space at Boeing
Field fill up, the person familiar with the matter said. It isn't
clear when restrictions could be lifted, but analysts said they
could remain in place for at least a matter of weeks.
The world-wide restrictions also dent Boeing's ability to
generate cash. Customers pay a large chunk of their bill when they
receive finished aircraft.
"It represents a clear logistical challenge," said Michel
Merluzeau, director of aerospace- and defense-market analysis at
AIR, a research firm in Seattle. "They have to continue to pump
these planes out of the factory."
The delivery pause doesn't affect delivery of Boeing's older
737NG models. Boeing's Renton factory churns out 52 737s a month,
and the company has planned to increase the rate to 57 this year.
Boeing has been phasing out the 737NG as it shifts increasingly
toward producing the MAX models.
Also Thursday, a senior Pentagon official indicated the U.S. Air
Force has lost confidence in Boeing's ability to maintain quality
control over a new aerial refueling tanker it is building.
Boeing delivered the first of the KC-46A Pegasus tankers in
January, more than a year late, after a series of production and
design problems left the aerospace company nursing $3.5 billion in
losses on the initial $4.9 billion contract.
The Air Force then suspended deliveries in February after
finding tools and other debris left in some jets, prompting a sharp
rebuke from defense chiefs.
"Well, we are not happy with this at all," Will Roper, the Air
Force's assistant secretary for Acquisition, Technology and
Logistics, told reporters after a congressional hearing. "We do not
want to be accepting tankers this way. Having teams sweep an
aircraft five times is simply unacceptable."
Deliveries of the tankers resumed this week, after Boeing
instituted fresh measures to check the aircraft, and the company
now has handed over seven planes out of the existing 52-jet
contract.
Mr. Roper said he is confident in the tanker's design and said
he even flew in the model delivered this week.
A Boeing spokesman said the company was focused on safety and
quality and had agreed on a plan with the Air Force to remedy the
debris and quality issues. Mr. Roper said this week's efforts to
search for the cause of the Boeing 737 MAX crashes had no impact on
military contracts.
"The government is a fair broker," he said. "We're dealing with
this issue as it is."
--Doug Cameron contributed to this article.
Write to Andrew Tangel at Andrew.Tangel@wsj.com and Ben Kesling
at benjamin.kesling@wsj.com
(END) Dow Jones Newswires
March 14, 2019 19:55 ET (23:55 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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