Quality Control Scrutiny Intensifies
As part of the FAA’s announcement, inspection and maintenance procedures for the Max 9 have been approved, but the agency did not specify when it would lift the pause on production increases. Mike Whitaker, the administrator of the FAA, stated that production expansion or approval of additional production lines for the 737 Max would only occur once they are satisfied with the resolution of quality control issues.
Impacted Production Goals
Boeing’s production plans for the 737 planes have suffered setbacks due to various factors. In 2023, the company averaged producing around 32 planes per month, with an aim to increase that number to 38 by the end of the previous year. The goal was then to reach 42 planes per month in 2024 and about 50 per month in 2025.
Airlines Adjusting Fleet Plans
The FAA’s decision to limit production has led many airlines to reevaluate their fleet plans. While some executives welcome this move as it ensures better quality and addresses safety concerns, adjustments are necessary due to revised delivery schedules. Southwest Airlines, for example, has decided to reduce the number of Boeing 737 MAX aircraft deliveries it expects and has removed any expectations of receiving the Max 7 jets in 2024.
However, the full impact of the FAA’s restrictions and airlines’ adjustments remain uncertain. Some analysts suggest that investors had already factored in a longer period at the 38-plane production rate, anticipating stability and increased quality. Ryanair, a European low-cost airline, has been assured by Boeing that the current monthly production limitation will not lead to further delays in their deliveries for 2024 and 2025 summer schedules.
Challenges in Production and Workforce
Boeing not only faces obstacles in production due to quality control concerns but also struggles to increase production due to labor shortages. The pandemic led to layoffs, retirements, and resignations, making it challenging to replace skilled workers. Finding and training new workers is time-consuming. The Max series, which includes the Max 8, Max 9, Max 7, and Max 10, has two models in production and two awaiting FAA certification.
Airlines Face Additional Cost Burdens
The production and safety delays at Boeing have wider implications for airlines. Delays in new aircraft deliveries force airlines to rely on older, less fuel-efficient planes, resulting in increased fuel expenses. Furthermore, new labor agreements grant raises to pilots, flight attendants, mechanics, and other workers. Consequently, airlines incur higher costs that were not initially anticipated, impacting their financial performance.
Amidst these challenges, airlines publicly criticize Boeing for its safety failures and production delays. Some carriers aim to negotiate improved terms for existing large orders, seeking penalties and cancellations if Boeing fails to meet its contractual obligations. It remains to be seen how Boeing will respond to these demands and how it will address the concerns of its airline partners.