By Andrew Tangel and Andy Pasztor
The U.S. on Wednesday approved Boeing Co.'s 737 MAX jets for
passenger flights again after dual crashes took 346 lives, issuing
a set of long-anticipated safety directives and notices to airlines
globally that will help resolve the plane maker's biggest
pre-pandemic crisis.
The Federal Aviation Administration's official order to release
the MAX, grounded since March 2019, came as the beleaguered Chicago
aerospace giant grapples with a host of new problems amid the
continuing health crisis.
The FAA's order for ungrounding allows Boeing to resume
delivering the jets to airlines and lets them carry passengers,
pending completion of certain mandatory fixes and additional pilot
training requirements spelled out in related documents also
released by the agency.
But the pandemic has sapped demand for air travel, prompting
airlines and aircraft-leasing firms to cancel about 10% of Boeing's
outstanding MAX orders this year. Boeing has said it believes
hundreds more of its remaining 4,102 orders could be in jeopardy
because of the financial health of some customers.
The FAA, as expected, also set new requirements that FAA
specialists -- rather than Boeing officials -- will need to sign
off on the condition of each MAX before the manufacturer hands them
over to customers.
The agency said that approval of the safety fixes, which include
new hardware and software changes affecting flight-control systems,
reflects "an unprecedented level of collaborative and independent
reviews by aviation authorities around the world." Those
regulators, according to the FAA, have indicated the fixes "will
give them the confidence to validate the aircraft as safe to fly in
their respective countries and regions."
Since each country's regulators have to separately approve
putting planes back in service, there could be some some lag
between the FAA's move and those decisions. Regulators in Europe
already have signaled they expect to act around the end of the
year. Canadian regulators on Wednesday said they expect to act
"very soon," adding that safety experts are continuing their
independent assessment and expect to mandate some differences in
training and emergency procedures.
Boeing said the FAA's approval confirmed its fixes to the MAX
will make the airplane safe to fly again. Chief Executive David
Calhoun said the company won't forget the lives lost in the
accidents.
"These events and the lessons we have learned as a result have
reshaped our company and further focused our attention on our core
values of safety, quality and integrity," he said in an internal
memo Wednesday.
Boeing shares rose 2.9% to $216.17 in trading Wednesday.
With Boeing's problem shifting from an inability to meet demand
to an oversupply, the MAX crisis has become a double whammy. The
manufacturer has estimated the crashes and the aftermath had cost
it about $20 billion, which includes financial hits related to
halting production earlier this year. Engineering mistakes and
management lapses provoked a tangle of civil litigation, a criminal
investigation and congressional scrutiny.
Accident investigators have said misfires of an automated
flight-control system, called MCAS, led to the crashes of
Indonesia's Lion Air in October 2018 and Ethiopian Airlines in
March 2019, when regulators grounded the MAX world-wide. Boeing has
spent the past two years hammering out fixes to the system,
revising pilot training and making related changes while responding
to demands from world regulators.
Meanwhile, the plane maker has said it is working to restore
credibility with the public. In planning for the MAX's return,
airlines have said they considered potential passenger reaction,
conducting their own surveys and laying out plans to rebook any
nervous travelers on different aircraft.
The MAX debacle prompted consternation among some of the
company's biggest customers, sparked a boardroom and management
shake-up inside Boeing and pushed the plane maker to revamp
internal engineering and safety-reporting procedures.
This year, Boeing customers have either walked away from jets
whose delivery has been delayed more than a year, as their
contracts typically allow them to do without penalty, or put off
taking the aircraft to future years when, according to industry
predictions, air travel recovers toward pre-pandemic levels.
Airlines around the world have been struggling financially
throughout the pandemic, in many cases putting the brakes on
long-planned airplane purchases as they lay off thousands of
employees, save cash and restructure debts. Some have stopped
flying altogether, further expanding the glut of planes.
Executives at Boeing have said they expect to deliver about half
of its inventory of about 450 built MAXs by the end of next year,
and the majority of those remaining the following year. While some
of the finished planes may need new buyers, the executives have
suggested many of the aircraft will likely wind up at their
originally intended operators, who have deferred deliveries to 2022
or later.
How quickly Boeing can move its finished MAX jets will determine
how many new aircraft it will eventually make. That production rate
will have implications for how many workers it needs and the
ability to generate cash in coming years.
"We're determined not to create a bigger problem than we started
with, and so that production rate will stay low until the movement
of those airplanes," Mr. Calhoun told analysts in late October.
Mr. Calhoun predicted a Covid-19 vaccine -- if, as U.S. health
officials suggest, it is available widely by the middle of next
year -- could help turn around Boeing's crises, leading to a "run
on the bank" for narrow-body airplanes. "It's going to be the
response when the recovery really does come," he said last month.
News of another promising vaccine trial has boosted aviation
stocks. Boeing's shares are up about 12% this week to $210.05 as of
Tuesday.
The accidents will have long-term fallout. They have led to
changes in airplane-design principles and created friction between
U.S. and international aviation regulators. Once the MAX fleet
returns to service, Canadian and European regulators are expected
to follow through with demands to incorporate additional safeguards
on both existing and future versions.
Not only has the MAX's protracted grounding allowed its European
rival, Airbus SE, to encroach on its market share for single-aisle
jets, but the pandemic has forced Boeing to cut back on production
of its wide-body jets such as the 787 Dreamliner as well. The
sudden drought in business has prompted the company to consolidate
factories and take steps to cut about 30,000 jobs.
Once the formal FAA orders are published Wednesday, Boeing, the
FAA and airlines still have to complete a host of technical and
logistical tasks to bring back jets stored for nearly two
years.
Maintenance work and operational test flights are the
responsibility of individual carriers. U.S. and European air-safety
officials already have issued a series of warnings to airlines,
alerting them about the hazards of possible fuel contamination and
sensors obstructed by debris that could cause accidents.
Airline officials have said it would take a month or two to put
thousands of their pilots through additional mandatory training,
including a roughly two-hour session in flight simulators that aims
to roughly replicate the accident scenarios.
MAX jets aren't expected to be in widespread use in the U.S.
until 2021, government and airline officials have said, partly
because carriers indicated they plan to phase them gradually into
schedules. It is likely to take foreign regulators and airlines
weeks or months longer, according to these officials.
Write to Andrew Tangel at Andrew.Tangel@wsj.com and Andy Pasztor
at andy.pasztor@wsj.com
(END) Dow Jones Newswires
November 18, 2020 10:08 ET (15:08 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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