The latest production flaw affecting The Boeing Co.’s (NYSE: BA) Renton-made 737 Max line appears likely to hinder its plans to ramp up production of the jet, dealing a blow to the company and its Puget Sound-area suppliers.
The issue, which surfaced last week, involves two of eight fittings used to join pieces of fuselages produced by supplier Spirit AeroSystems Inc. of Wichita, Kansas. While Boeing hasn’t released information on the number of affected aircraft, it said the issue affects two variants of its 737 Max and other aircraft in the family made as far back as 2019.
“It’s a setback on the production ramp that (suppliers) don’t need,” said aerospace analyst Richard Aboulafia of AeroDynamic Advisory. “This is a complex network of companies and some of them have been badly weakened by the pandemic by the Max shutdown, and they couldn’t get the ramp fast enough.”
Boeing shut down its 737 Max production line for four months in 2020 amid the global grounding of the plane after two deadly crashes in 2018 and 2019.
Regarding the latest issue, Boeing has said it is in the process of inspecting and beginning rework on planes in inventory and in production, but it has not released an estimate of how much the added work will cost. It added that the problem is not a safety-of-flight issue for the jets in service.
“We will take the time necessary to ensure each airplane meets our highest standards and regulatory requirements prior to ticketing and delivery,” Boeing told the Business Journal in an email statement. “We expect this will result in a reduction in near-term deliveries. We are still assessing the longer-term impact, and will provide additional information in the days and weeks ahead as we better understand the delivery impacts.”
Boeing is scheduled to report its first quarter earnings April 26.
While the rework will put further strain on its near-term production goals, it’s limited in scope, Cowen aerospace analyst Cai von Rumohr said in a note to investors Friday.
Spirit “sees little impact on planes for which the fittings have yet to be installed,” he said. “Hence, once rework is completed, production should get back on track.”
He estimated that deliveries would pick back up quickly once the jets with non-conforming parts are removed from the production line.
Though Boeing hasn’t publicly said when it plans to hike production rates, it was expected to increase assembly activity to 38 jets in June, up from the current 31 per month, and to 50 or more per month by 2025.
“Because the latest planned Max ramp was aggressive to begin with, we think it’s fair to assume there will be slippage,” von Rumohr said.
The latest production issue could further undermine customer confidence in Boeing’s ability to deliver the thousands of jets in its backlog after delays related to its 787 and 767 production surfaced earlier this year. However, customers are left with few options, Aboulafia said.
“It’s yet another moment that Boeing has to be thankful that this in an industry with the world’s highest barriers to entry,” he said.
“A Max for any of these carriers is still really the only game in town,” Aboulafia said.
European jet maker Airbus, too, is facing impediments to ramping up production, and high fuel prices have airlines prioritizing newer, more fuel-efficient aircraft.