WASHINGTON, Jan 08 (Job Freaker) – Boeing is facing renewed regulatory attention following a mid-air blowout, a situation investors and management were hoping to avoid. This comes at a critical time as the company awaits approval for new models of its popular MAX jet.
Investigators are currently unable to pinpoint the cause of a door plug detachment from an aircraft operated by Alaska Airlines, a trusted Boeing customer. The incident occurred on Friday with 171 passengers on board.
On Sunday, the Federal Aviation Administration (FAA) announced the grounding of 171 Boeing MAX 9 airplanes until they are assured of safe operation. This incident adds to the challenges faced by Boeing and its supplier, Spirit AeroSystems, as they confront production delays affecting the recovery from the prior 737 MAX safety grounding and pandemic-related disruptions.
Boeing faces pressure to enhance the MAX portfolio and close the gap with competitor Airbus. The aftermath of two fatal Boeing MAX crashes in 2018 and 2019, which led to a 20-month global grounding, prompted extensive reforms in U.S. airplane regulation in 2020. The recent incident with Alaska Airlines may prompt regulators to adopt a stricter stance on unresolved issues.
Airlines are seeking to maximize the performance and range of single-aisle aircraft while capitalizing on their cost-effectiveness by accommodating more passengers.
Boeing, following subdued sales of the MAX 9, its largest narrowbody, placed its hopes on the MAX 10—a higher-capacity model—to compete with Airbus’s popular A321neo in the bustling market segment. Analysts emphasize the significance of a comprehensive MAX lineup for Boeing to stabilize or enhance its approximately 40% market share and secure sufficient cash flow for the next decade.
With a hefty $39 billion debt burden, Boeing has hesitated to invest in a completely new aircraft until engine technology advances in the next decade. Analysts suggest that certification delays for the MAX 10 could intensify pressure on Boeing’s strategy spanning the 2020s.
The company’s challenges are closely monitored by China, a crucial market that has been largely inaccessible to Boeing due to MAX safety concerns and concurrent trade tensions. Chinese officials sought information on the Alaska incident on Saturday, according to sources.
Boeing and Spirit have chosen not to provide comments. Since the grounding of the 737 MAX in March 2019, Boeing shares have declined by over 40%, while Airbus shares have seen a 25% increase.
The certification fate of the smallest MAX version, the MAX 7, will likely indicate the fallout, with former air crash investigator Jeff Guzzetti highlighting the potential impact of the MAX 9 incident. The FAA is considering an exemption for the MAX 7’s certification, but the recent accident may influence a stricter approach.
The FAA emphasized that ongoing certification timelines will be determined by safety considerations but refrained from offering additional comments.
QUALITY ISSUES
The cause of the blowout is yet to be determined, but experts suggest that if a production issue led to the MAX 9 panel detachment, it could reignite discussions on recent quality problems. Jeff Guzzetti emphasized the need to address production deficiencies comprehensively.
Michel Merluzeau of AIR Strategic Advisory pointed out that Boeing’s 737 manufacturing line, originally not designed for 750 aircraft annually, has undergone changes. While robotics have been introduced, Boeing aims for more significant digital reforms in future programs, engaging in a production strategy competition with Airbus while addressing supply chain and labor challenges.
Richard Aboulafia of AeroDynamic Advisories points out that past initiatives pressuring suppliers to cut costs, coupled with a disconnect between top executives and the engineering and manufacturing teams, have exacerbated Boeing’s challenges.
Recent 737 production setbacks, including issues with hardware, drilling errors by Spirit, and improper attachment of brackets, highlight ongoing problems. In February, 787 Dreamliner deliveries were halted due to a data analysis error.
Boeing, despite setbacks, asserts that its patient approach to production is yielding positive results. CEO Dave Calhoun emphasized a cautious but steady increase in the production system while ensuring alignment with the supply base.
