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BOEING COMPANY (THE)

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Boeing 737 MAX Grounding Could Stretch Into 2020 -- Update

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07/14/2019 | 12:23pm EDT

By Andy Pasztor, Alison Sider and Andrew Tangel

Fixing the Boeing Co. 737 MAX's flight-control software and completing other steps to start carrying passengers is likely to stretch into 2020, an increasing number of government and industry officials say, even as the company strives to get its jet back into service this year.

The situation remains fluid, no firm timeline has been established and Boeing still has to satisfy U.S. regulators that it has answered all outstanding safety questions. But under the latest scenario, the global MAX fleet is now anticipated to return to the air in January 2020, a full 12 months after the plane maker proposed its initial replacement of software eventually implicated in a pair of fatal crashes, according to some Federal Aviation Administration officials and pilot-union leaders.

The process of developing and certifying revised software and pilot-training changes has been repeatedly delayed, with airlines scrambling to cope with slips month after month. Boeing executives, FAA engineers and international aviation regulators have steadily expanded their safety analyses to cover a growing list of issues spanning everything from emergency recovery procedures to potentially suspect electronic components. Some of those assessments are further complicated because they cover earlier 737 models.

Already, carriers have given up on flying their MAX planes until late this year. American Airlines Group Inc. said Sunday that it would keep the plane off its schedules through Nov. 2, two months beyond its previous target of an early September return. It's the fifth time American has pushed off MAX flying since it first had to call off flights when regulators grounded the plane in March. United Airlines Holdings Inc. announced a similar move on Friday, but FAA officials and others tracking the issue said there's no assurance the November date will hold.

Airlines didn't expect to be in this position at this point in the year, with no end to the grounding in sight. When American first decided to scrub MAX flights for much of the summer, executives said they were doing it to save customers from last minute cancellations but were still "highly confident" the plane would return sooner.

Instead, they have had to cope without their MAX jets through what has proven an exceptionally busy summer. The Transportation Security Administration has notched eight of the 10 busiest days in its history since May.

Senior Boeing executives and some FAA leaders have told government and industry officials they still expect the agency to be ready to lift the grounding in the fall, which presumably would enable the jets to resume carrying passengers before the end of the year. But based on a history of previous delays and unexpected technical challenges, many of these officials said, at this point sentiment seems to be building that a conservative January timeline is more realistic.

The FAA has said it is following a thorough process that has no timetable, with agency leaders vowing to resolve all safety issues before allowing the planes back in the air.

Boeing has said it intends to "provide the FAA and the global regulators whatever information they need," noting that the company won't offer the 737 MAX "for certification by the FAA until we have satisfied all requirements" for such approval and safe return to service.

The specific software fix for MCAS, an automated system that misfired, overpowered pilot commands and strongly pushed down the noses of both of the MAX airliners that crashed, has been essentially completed and awaiting formal FAA approval for months. But in the intervening period, Boeing and safety regulators have been delving into various related issues that cropped up from earlier engineering studies, ground-simulator sessions and flight tests.

During early stages of work on the fix, Boeing and FAA officials disagreed behind the scenes about the extent of changes needed to reduce hazards posed by the MCAS system, according to people familiar with the details. Then in March, just as Boeing was slated to submit a long-awaited proposal with the goal of jump-starting the process, new questions arose about related software systems and emergency checklists, requiring weeks of additional intense evaluation.

The topics included concerns about whether the average pilot has enough physical strength to manually crank a flight-control wheel in extreme emergencies.

In late June, Boeing and the FAA disclosed still another flight-control problem on the MAX, involving failure of a microprocessor that meant test pilots couldn't counteract a potential misfire of MCAS as quickly as required.

Since the 737 MAX and its earlier version, called the 737 NG, share the same flight-control computer, fixes related to the microprocessor also apply to NG models, thousands of which remain in service around the world. Boeing also faces the task of convincing the FAA that a software fix, instead of physically replacing the suspect electronic component on all MAX planes, will suffice.

Even assuming new MAX issues don't crop up, Boeing will need FAA approval for its entire suite of fixes, not just those directly related to MCAS, along with a new round of flight tests, a green light for enhanced training procedures and approval of updated simulator software. In addition, airlines have said it could take them up to 45 days to complete necessary maintenance procedures and other mandatory checks by mechanics to bring MAX aircraft out of storage.

From a purely technical standpoint, some senior FAA officials believe they could be in a position to approve Boeing's proposed fix at some point in October, though working with international regulators on a coordinated return to service could cause a delay, according to one person briefed on the matter. Another wild card, this person added, relates to the potential impact of new FAA leadership if the U.S. Senate confirms Stephen Dickson in the fall as the next agency administrator.

Each month the plane's return is delayed means a new puzzle for airlines: how to build a new schedule that covers as much flying as possible with fewer jets. Some customers who had already planned flights have to be rebooked -- sometimes at a less convenient time or with an added stop. Pilots and flight attendants also have to be reshuffled.

Now, carriers are nervously eyeing the holiday season, when they will face a crush of travelers whose Thanksgiving and Christmas travel plans leave little wiggle room. United was supposed to have 30 MAXes in the coming months, up from 14. As a result it is cutting 2,900 flights in October -- more than twice the number it has had to cull in July. American Airlines had 24 MAXes in its fleet at the time of the grounding -- less than 3% of its total. But it was supposed to have 40 by the end of the year.

At Southwest Airlines Co., Alan Kasher, vice president of flight operations, said in a message to employees Friday that the airline is "overstaffed," with more pilots than it needs to operate a shrunken schedule stemming from the grounding of its 34 MAX jets. Some Southwest pilots have complained of lost earnings from fewer flying opportunities.

With the timing of the MAX's return still murky, the airline is postponing training for some newly hired pilots who were set to start this fall and pushing back training for some current Southwest co-pilots on track to upgrade to captain.

Write to Andy Pasztor at andy.pasztor@wsj.com, Alison Sider at alison.sider@wsj.com and Andrew Tangel at Andrew.Tangel@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
BOEING COMPANY (THE) 1.34% 368.97067 Delayed Quote.3.18%
BOEING COMPANY (THE) 1.87% 369.52 Delayed Quote.12.48%
ONE STOP SYSTEMS INC -5.38% 1.76 Delayed Quote.-9.28%
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Financials (USD)
Sales 2019 96 617 M
EBIT 2019 10 807 M
Net income 2019 9 057 M
Debt 2019 10 373 M
Yield 2019 2,15%
P/E ratio 2019 23,8x
P/E ratio 2020 14,6x
EV / Sales2019 2,26x
EV / Sales2020 1,76x
Capitalization 208 B
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Average target price 422,91  $
Last Close Price 369,52  $
Spread / Highest target 35,3%
Spread / Average Target 14,4%
Spread / Lowest Target -18,8%
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NameTitle
Dennis A. Muilenburg Chairman, President & Chief Executive Officer
Jenette E. Ramos Senior Vice President-Supply Chain & Operations
Gregory D. Smith CFO, EVP-Corporate Development & Strategy
Theodore Colbert Chief Information Officer & SVP-Data Analytics
Gregory L. Hyslop CTO, Senior VP-Engineering, Test & Technology
Sector and Competitors
1st jan.Capitalization (M$)
BOEING COMPANY (THE)12.48%207 903
AIRBUS SE57.17%110 305
TEXTRON17.48%12 225
DASSAULT AVIATION1.41%10 933
EMBRAER-11.16%3 759
AVIC ELECTROMECHANICAL SYSTEMS CO LTD--.--%3 540