Amid sharply slowing sales, Boeing desperately needs regulators to approve its proposed software fixes for the 737 Max in the coming months. Airlines have said they plan to return the jet to service as soon as January — but that timeline hinges on Boeing’s satisfying global authorities, some of which appear increasingly frustrated with the company’s response to the safety issues surrounding the Max.
Boeing said its latest financial results assume the 737 Max fixes will be approved by regulators by the end of the year. The company said it plans to increase production of the jet to 57 per month by late 2020, up from its pace of 42 a month now. Boeing lowered its production from 52 a month after the grounding in March.
But on a call with analysts Wednesday, CEO Dennis Muilenburg cautioned that a further delay in regulatory approvals for the 737 Max could force the company to consider cutting production again — or even a “temporary shutdown of the Max production line.”
Boeing also said it plans to lower production of the 787 Dreamliner beginning in late 2020, saying U.S.-China trade tensions and weaker demand from Chinese customers have created a setback for the long-haul jetliner.
“I think the recent trade discussions have been productive — they’re moving in a good direction,” Muilenburg said on the analyst call. “But for purposes of our company, we have to be very disciplined in our production rate management.”
Muilenburg is to testify in Congress next week, close to the first anniversary of the first 737 Max crash. He is expected to face questions about why the company failed to promptly provide regulators with text messages in which a high-level Boeing employee wrote about an “egregious” problem with the plane’s flight-control software and said he “basically lied to the regulators (unknowingly)” about it.
The messages show Boeing’s experts had identified critical safety concerns with the Max years ago, even as Boeing executives have publicly argued the company had followed its own rigorous protocols for design and certification of the jet. In a stern letter to Boeing last week, the administrator of the Federal Aviation Administration, Stephen Dickson, said: “I expect your explanation immediately.”
Boeing’s stock has fallen 24 percent since early March, when a second crash of the 737 Max prompted the jet’s worldwide grounding and created new risks for a company that was once a Wall Street darling. Analysts at Credit Suisse downgraded the stock this week, saying the text messages and other disclosures about Boeing’s handling of safety issues “may shatter the fragile trust between regulators and Boeing.”
The crisis is already reshaping Boeing’s leadership. Muilenburg, still CEO, was stripped of his title of chairman of the board — an effort by Boeing’s board to provide a stronger check on his power. Boeing said this week that Kevin McAllister, the executive who oversaw the 737 Max as head of the commercial planes division, resigned from that role and was replaced by company veteran Stan Deal.
McAllister, a former General Electric executive hired to lead Boeing’s commercial business in 2016, sold about $5 million in shares of the company in February of this year, according to a regulatory filing.