By Andrew Tangel and Andy Pasztor
The U.S. on Wednesday approved Boeing Co.'s 737 MAX jets for
passenger flights again after dual crashes took 346 lives, helping
to resolve the plane maker's biggest pre-pandemic crisis.
The Federal Aviation Administration's official order to release
the MAX, grounded since March 2019, comes as the beleaguered
Chicago aerospace giant grapples with a host of new problems amid
the continuing health crisis.
The FAA's order for ungrounding would allow Boeing to resume
delivering the jets to airlines and let them carry passengers. But
the pandemic has sapped demand for air travel, prompting airlines
and aircraft-leasing firms to cancel about 10% of Boeing's
outstanding MAX orders this year. Boeing has said it believes
hundreds more of its remaining 4,102 orders could be in
jeopardy.
With Boeing's problem shifting from an inability to meet demand
to an oversupply, the MAX crisis has become a double whammy.
The manufacturer has estimated the debacle had cost it about $20
billion, which includes financial hits related to halting
production earlier this year. Engineering mistakes and management
lapses provoked a tangle of civil litigation, a criminal
investigation and congressional scrutiny.
Boeing declined to comment before the FAA issues its ungrounding
order, which U.S. officials said was on track to be issued
Wednesday. The company has previously said it was working to regain
the trust of its customers, regulators and the flying public and
was dedicated to preventing similar accidents.
Accident investigators have said misfires of an automated
flight-control system, called MCAS, led to the crashes of
Indonesia's Lion Air in October 2018 and Ethiopian Airlines in
March 2019, when regulators grounded the MAX world-wide. Boeing has
spent the past two years hammering out fixes to the system,
revising pilot training and making related changes while responding
to demands from world regulators.
Meanwhile, the plane maker has said it is working to restore
credibility with the public. In planning for the MAX's return,
airlines have said they considered potential passenger reaction,
conducting their own surveys and laying out plans to rebook any
nervous travelers on different aircraft.
The MAX debacle prompted consternation among some of the
company's biggest customers, sparked a boardroom and management
shake-up inside Boeing and pushed the plane maker to revamp
internal engineering and safety-reporting procedures.
This year, Boeing customers have either walked away from jets
whose delivery has been delayed more than a year, as their
contracts typically allow them to do without penalty, or put off
taking the aircraft to future years when, according to industry
predictions, air travel recovers toward pre-pandemic levels.
Airlines around the world have been struggling financially
throughout the pandemic, in many cases putting the brakes on
long-planned airplane purchases as they lay off thousands of
employees, save cash and restructure debts. Some have stopped
flying altogether, further expanding the glut of planes.
Executives at Boeing have said they expect to deliver about half
of its inventory of about 450 built MAXs by the end of next year,
and the majority of those remaining the following year. While some
of the finished planes may need new buyers, the executives have
suggested many of the aircraft will likely wind up at their
originally intended operators, who have deferred deliveries to 2022
or later.
How quickly Boeing can move its finished MAX jets will determine
how many new aircraft it will eventually make. That production rate
will have implications for how many workers it needs and the
ability to generate cash in coming years.
"We're determined not to create a bigger problem than we started
with, and so that production rate will stay low until the movement
of those airplanes," Boeing Chief Executive David Calhoun told
analysts in late October.
Mr. Calhoun predicted a Covid-19 vaccine -- if, as U.S. health
officials suggest, it is available widely by the middle of next
year -- could help turn around Boeing's crises, leading to a "run
on the bank" for narrow-body airplanes. "It's going to be the
response when the recovery really does come," he said last month.
News of another promising vaccine trial has boosted aviation
stocks. Boeing's shares are up about 12% this week to $210.05 as of
Tuesday.
The accidents will have long-term fallout. They have led to
changes in airplane-design principles and created friction between
U.S. and international aviation regulators. Once the MAX fleet
returns to service, Canadian and European regulators are expected
to follow through with demands to incorporate additional safeguards
on both existing and future versions.
Not only has the MAX's protracted grounding allowed its European
rival, Airbus SE, to encroach on its market share for single-aisle
jets, but the pandemic has forced Boeing to cut back on production
of its wide-body jets such as the 787 Dreamliner as well. The
sudden drought in business has prompted the company to consolidate
factories and take steps to cut about 30,000 jobs.
Once the formal FAA orders are published Wednesday, Boeing, the
FAA and airlines still have to complete a host of technical and
logistical tasks to bring back jets stored for nearly two
years.
Maintenance work and operational test flights are the
responsibility of individual carriers. U.S. and European air-safety
officials already have issued a series of warnings to airlines,
alerting them about the hazards of possible fuel contamination and
sensors obstructed by debris that could cause accidents.
Airline officials have said it would take a month or two to put
thousands of their pilots through additional mandatory training,
including a roughly two-hour session in flight simulators that aims
to roughly replicate the accident scenarios.
MAX jets aren't expected to be in widespread use in the U.S.
until 2021, government and airline officials have said, partly
because carriers indicated they plan to phase them gradually into
schedules. It is likely to take foreign regulators and airlines
weeks or months longer, according to these officials.
Write to Andrew Tangel at Andrew.Tangel@wsj.com and Andy Pasztor
at andy.pasztor@wsj.com
(END) Dow Jones Newswires
November 18, 2020 08:27 ET (13:27 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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