With the 737 MAX return-to-service date now set to slide deeper into 2020 and continuing uncertainty over when the aircraft will be approved by the FAA and international regulators, Boeing is reportedly delaying plans to accelerate production to 57 per month until 2021.
Boeing cut 737 productions from 52 to 42 per month in April in the wake of the global grounding of the MAX in March following two fatal accidents. However, in October, amid signs that the aircraft was on track for approval to return-to-service by year-end 2019, the company announced it hoped to return to its original pre-grounding production ramp trajectory over a series of steps and achieve a planned rate of 57 aircraft per month by the end of 2020.
Now, according to a Reuters report, as delays to the approval of the MAX mount up, Boeing has pushed back the schedule for the rate rise by several months with the first step, a rate rise to 47 per month, delayed until March 2020. The next phase would see the rate increase to 52 per month in September 2020 and the follow-on push to 57 per month would not occur until April 2021. The report also indicates that these timelines could also slide further, pending the potential impact of additional delays to re-certification.
Boeing is not commenting on the potential production plan revision which, if confirmed, would have a significant overall impact on the company’s earnings for 2020 and beyond. Although these are expected to rebound in 2020 with the gradual delivery of around 400 aircraft already completed, the company is counting on the accelerating MAX production rate to backfill the delivery pipeline and generate income. Aside from losses associated with the MAX crisis, Boeing’s 777X program has been delayed a year and the cash-generating 777 and 787 lines are both scheduled to slow later in 2020.
Some analysts meanwhile do not appear to be surprised by the news. Robert Singarn of Credit Suisse said, “we have always viewed Boeing’s ramp schedule as optimistic and have been modeling the ramp to 47 for the third quarter of 2020 and to 57 for the third quarter of 2021.”
The potential change in the ramp-up plan comes after FAA Administrator Steve Dickson told members of the U.S. Transportation and Infrastructure committee on Dec 11. that the proposed fixes to the MAX will take longer to complete than Boeing originally projected. Outstanding work includes completion and approval of updated training and reviews of final design documentation by both the FAA and the independent Technical Advisory Board that is validating Boeing’s changes and advising the agency.