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MarketScreener Homepage  >  Equities  >  Nyse  >  Boeing Company (The)    BA

BOEING COMPANY (THE)

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Boeing Finds Fuel-Tank Debris in Two-Thirds of 737 MAX Jets Inspected So Far -- Update

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02/21/2020 | 10:19pm EDT

By Andrew Tangel, Andy Pasztor and Alison Sider

Boeing Co. has found debris inside the fuel tanks of about two-thirds of undelivered 737 MAX jets inspected so far, according to federal and aviation-industry officials, indicating a bigger production-related problem than the company previously suggested.

The revelation comes as the plane maker struggles to restore public and airline confidence in the grounded fleet.

A Boeing spokesman said Friday the plane maker has found debris in fuel tanks of about 35 jets.

While Boeing disclosed the debris problem publicly earlier this week, the latest details shed more light on the scale of the issue. Industry officials said Boeing has so far inspected about 50 of roughly 400 MAX planes awaiting delivery once regulators allow the jet back in the air. Materials left behind include tools, rags and boot coverings, according to industry officials familiar with the details.

The problem marks the latest in a string of setbacks stretching over many months that have delayed the return of the MAX to commercial service while raising questions about the plane maker's safety and engineering culture.

Boeing's initial comments on Tuesday indicated it came across evidence of such assembly-line lapses in several MAX jets, without disclosing the precise number or the total that had been inspected. Boeing executives have recently pledged greater transparency following a series of belated disclosures to regulators, airlines and the public.

On Friday, the Boeing spokesman said inspections first found the fuel-tank debris in late November and immediately notified the Federal Aviation Administration. He said the manufacturer has added safeguards to prevent workers from leaving materials inside fuel tanks at its 737 factory in Renton, Wash., and beefed up efforts across the company.

"Boeing is taking it very, very seriously," the spokesman said.

The FAA earlier this week said that once Boeing informed it about the problems, the agency moved to step up surveillance and plans further action as appropriate based on additional inspection findings. On Friday, an agency spokesman reiterated the voluntary inspections are "part of the company's ongoing efforts to ensure manufacturing quality."

Boeing has also broadened its debris inspections to cover other interior spaces and compartments inside the MAX besides fuel tanks, according to industry and government officials.

Industry officials cautioned that the percentage of planes with problems may decline as inspections progress, depending on the time period in which they were assembled and other factors.

The inspections have raised red flags, some of the officials said, because Boeing's commercial-airplane unit traditionally has been recognized as a leader in devising systems to combat such production lapses. All tools used inside aircraft are supposed to be logged and tagged, with employees double-checking each other to verify each piece of equipment is removed. The Boeing spokesman said the company has ramped up such checks to prevent future problems.

Regulators have grounded the aircraft since March 2019, following the second of two fatal crashes that killed a total of 346 people.

Boeing has assigned a team to look after the parked planes, many of them already painted in the colors of the airlines buying them, conducting regular checks to prepare for their eventual delivery when regulators give the green light.

Unwanted tools and debris left inside finished airplanes can pose various operational risks. In fuel tanks, such debris can clog fuel lines and damage sensors, pumps or interior linings.

The emergence of so-called foreign object debris, known in the industry as FOD, comes as Boeing and regulators have been grappling with much more complicated technical issues for more than a year: fixing a flight-control system implicated in both fatal crashes and overhauling related pilot training.

Boeing has said it doesn't expect checking planes and removing any debris to delay the MAX's clearance from regulators to return to service, which it currently expects to start midyear. But the new problem raises fresh questions about Boeing's ability to resolve lingering lapses in quality-control practices and presents another challenge to Chief Executive David Calhoun, who took charge in January.

MAX operators and customers said they became aware of the issue with the undelivered MAX jets earlier this week.

Some airlines said they were taking steps to ensure that there wasn't any debris in planes that have already been delivered and were operational before the grounding. Southwest Airlines Co. said it had already been planning to inspect the fuel tanks of the 34 stored MAX planes it operated prior to the grounding before they return to service. A spokesman for American Airlines Group Inc. said the airline conducts its own inspections before and after taking delivery of new planes. American said it would perform additional inspections on its 24 grounded MAX jets before they return to service, though there have been no signs of problems with debris in those planes. United Airlines Holdings Inc. also said it plans to inspect its MAX planes, including the fuel tanks, before they resume flying.

In addition, FAA inspectors will check every MAX individually for required maintenance, various inspections and suitable readiness before allowing it to carry passengers.

The 737 MAX is the latest Boeing jet to face such problems. Last year, debris was found on some 787 Dreamliners, which Boeing produces in Everett, Wash., and North Charleston, S.C.

Boeing also twice had to halt deliveries of the KC-46A military refueling tanker to the U.S. Air Force after tools and rags were found in planes after they had been delivered from its Everett factory north of Seattle.

Pentagon leaders said last March that it could take a year for Boeing to rebuild trust in the program.

"It does not take a rocket scientist to deliver an airplane without trash and debris on it," Air Force procurement chief Will Roper said in an interview last June. "It just merely requires following a set of processes, having a culture that values integrity of safety above moving the line faster for profit. And Boeing has certainly conveyed they're serious [about] restoring that culture."

Later that year, in October, Boeing ousted its commercial-airplane division chief, Kevin McAllister, as the MAX crisis dragged on. In December, the company's board -- then headed by Mr. Calhoun -- removed then-CEO Dennis Muilenburg and installed Mr. Calhoun as his successor.

Boeing has said it had put in place new procedures to keep debris out of finished airplanes. It halted MAX production in January amid the prolonged grounding.

Boeing's general manager for the 737 program, Mark Jenks, in a message to employees earlier this week, said: "FOD is absolutely unacceptable."

With MAX production halted, Boeing's Renton, Wash., factory still produces military versions of the 737 for the U.S. Navy and some international customers, including the U.K.'s Royal Air Force.

The Navy, which started receiving the P-8A Poseidon jets in 2012, hasn't found any debris in the aircraft's fuel tanks, a spokeswoman said. Government inspectors have for years conducted their own checks along with Boeing personnel, she added.

Doug Cameron contributed to this article.

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

 

Stocks mentioned in the article
ChangeLast1st jan.
AMERICAN AIRLINES GROUP INC. 10.86% 11.33 Delayed Quote.-60.50%
BOEING COMPANY (THE) 3.74% 146.87 Delayed Quote.-56.54%
SOUTHWEST AIRLINES 4.67% 34.3 Delayed Quote.-36.46%
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Financials (USD)
Sales 2020 78 307 M
EBIT 2020 4 226 M
Net income 2020 1 265 M
Debt 2020 32 374 M
Yield 2020 2,48%
P/E ratio 2020 79,1x
P/E ratio 2021 11,0x
EV / Sales2020 1,47x
EV / Sales2021 1,09x
Capitalization 82 868 M
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Last Close Price 146,87  $
Spread / Highest target 200%
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David L. Calhoun President, Chief Executive Officer & Director
Lawrence W. Kellner Non-Executive Chairman
Jenette E. Ramos Senior Vice President-Supply Chain & Operations
Gregory D. Smith CFO, EVP-Enterprise Performance & Strategy
Theodore Colbert Executive Vice President
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