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Boeing 737 MAX Cleared

Old 11-18-2020, 06:20 AM
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Default Boeing 737 MAX Cleared

Boeing 737 MAX Cleared to Fly Again, but Covid-19 Has Sapped Demand

FAA’s order ungrounding the aircraft following two fatal crashes removes one major obstacle as the pandemic creates fresh problems for Boeing

By and
Updated Nov. 18, 2020 9:53 am ET

A Boeing 737 MAX jet at the company's Renton, Wash., production facility last week.

Photo: David Ryder/Getty ImagesThe U.S. on Wednesday approved Boeing Co. BA 2.03% ’s 737 MAX jets for passenger flights again after dual crashes took 346 lives, issuing a set of long-anticipated safety directives and notices to airlines globally that will help resolve the plane maker’s biggest pre-pandemic crisis.

The Federal Aviation Administration’s official order to release the MAX, grounded since March 2019, came as the beleaguered Chicago aerospace giant grapples with a host of new problems amid the continuing health crisis.

The FAA’s order for ungrounding allows Boeing to resume delivering the jets to airlines and lets them carry passengers, pending completion of certain mandatory fixes and additional pilot training requirements spelled out in related documents also released by the agency.

But the pandemic has sapped demand for air travel, prompting airlines and aircraft-leasing firms to cancel about 10% of Boeing’s outstanding MAX ordersthis year. Boeing has said it believes hundreds more of its remaining 4,102 orders could be in jeopardy because of the financial health of some customers.

The FAA, as expected, also set new requirements that FAA specialists—rather than Boeing officials—will need to sign off on the condition of each MAX before the manufacturer hands them over to customers.

The agency said that approval of the safety fixes, which include new hardware and software changes affecting flight-control systems, reflects “an unprecedented level of collaborative and independent reviews by aviation authorities around the world.” Those regulators, according to the FAA, have indicated the fixes “will give them the confidence to validate the aircraft as safe to fly in their respective countries and regions.”

Since each country’s regulators have to separately approve putting planes back in service, there could be some lag between the FAA’s move and those decisions. Regulators in Europe already have signaled they expect to act around the end of the year. Canadian regulators on Wednesday said they expect to act “very soon,” adding that safety experts are continuing their independent assessment and expect to mandate some differences in training and emergency procedures.

Boeing said the FAA’s approval confirmed its fixes to the MAX will make the airplane safe to fly again. Chief Executive David Calhoun said the company won’t forget the lives lost in the accidents.

“These events and the lessons we have learned as a result have reshaped our company and further focused our attention on our core values of safety, quality and integrity,” he said in an internal memo Wednesday.

Boeing shares rose 2.9% to $216.17 in trading Wednesday.

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 crashes and the aftermath 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.

From the Archives



Inside the Boeing Scandal That Rocked the Aviation Industry
0:00 / 15:01
0:00Inside the Boeing Scandal That Rocked the Aviation Industry
Boeing’s two 737 MAX 8 crashes and the investigation that followed ruined not just the aircraft manufacturer’s reputation but also its bottom line. WSJ’s aviation reporters break down how the scandal unfolded and explain what the flying public can expect in the future. Photo: Gary He/EPA-EFE (Originally published March 9, 2020)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,” Mr. 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.

SHARE YOUR THOUGHTS

Do you think Boeing and the FAA have adequately addressed the issues with the 737 MAX and the training required of pilots? Why or why not? Join the conversation below.

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 [email protected] and Andy Pasztor at [email protected]
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Old 11-18-2020, 05:30 PM
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And yet Boeing stock is down today.
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Old 11-18-2020, 06:14 PM
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Originally Posted by WHACKMASTER View Post
And yet Boeing stock is down today.
Yeah, 203.30 after hours off its high of 219.74. It was at 179 on Friday.
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Old 11-18-2020, 06:23 PM
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Originally Posted by Texasbound View Post
Yeah, 203.30 after hours off its high of 219.74. It was at 179 on Friday.

Buy rumor, sell news. Rinse and repeat.
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Old 11-19-2020, 03:58 AM
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I suspect COVID will give operators of the MAX the breathing room they need to accomplish all the AD requirements before demand picks up. Airplane modifications, crew training, etc. will all take time and resources that could’ve been in short supply had holiday demand been 100% of normal.
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Old 11-19-2020, 09:13 AM
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Originally Posted by Peabody17 View Post
I suspect COVID will give operators of the MAX the breathing room they need to accomplish all the AD requirements before demand picks up. Airplane modifications, crew training, etc. will all take time and resources that could’ve been in short supply had holiday demand been 100% of normal.
breathing room is an understatement.
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Old 11-19-2020, 09:34 AM
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Originally Posted by threeighteen View Post
breathing room is an understatement.
More like an empty room.
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Old 11-20-2020, 09:41 PM
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Originally Posted by Seneca Pilot View Post
Buy rumor, sell news. Rinse and repeat.
Benjamin Graham in the classic book, “The Intelligent Investor” said in the short term, stocks are voting machines (whatever the herd votes with its stampeding feet based on rumor or anticipated facts), and in the long term a weighing machine (determining the long term value and pricing stock based on it.)

Secondly, the stock market prices in where things are expected to be, in 3-30 months. The public screams how can stocks go up when we are in the middle of a pandemic! Wiser stock investors anticipate there is a high likelihood of a vaccine with travel and business returning to near normal in that time period. They invest based on this anticipated future.

These are both keys that my wise investment management firm share in education of their clients. It is not something I have sucked out of my thumb.
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