Boeing’s New CEO Sees Production Restart for Max in a Few Months
(Bloomberg) -- Boeing Co.’s new leader expects to restart production of the 737 Max within a few months -- even before the grounded jet wins approval to resume flying.
After halting output of the plane this month, Boeing and its suppliers will “slowly, steadily” return to normal rates beginning probably around April, Chief Executive Officer Dave Calhoun said Wednesday. The company notified customers this week that the Max isn’t likely to be cleared for service until the middle of this year.
“Production will be reinvigorated months before that moment in June, because we’ve got to get that line started up again,” Calhoun told reporters on a wide-ranging conference call, his first with the media since taking the reins Jan. 13. “The supply chain will be reinvigorated even before that.”
Boeing’s willingness to restart production before the Max wins regulatory certification to fly suggests that the company is comfortable with its ability to surmount the remaining hurdles. The Chicago-based company has stumbled repeatedly as it has sought approval for the Max, which has been grounded since March after two crashes killed 346 people.
The shares pared losses as the CEO spoke, but still fell 1.4% to $309 at the close in New York. That pushed Boeing to the lowest since December 2018, about two months after a Lion Air jet slammed into the Java Sea off the coast of Indonesia. An Ethiopian Airlines plane crashed in March of last year.
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Calhoun, a longtime Boeing board member, sought to differentiate himself from his predecessor as CEO, Dennis Muilenburg. The new boss acknowledged that Boeing had made mistakes, saying the company at times was its “own worst enemy.” He also said the Max crisis has shaken confidence in the company among Boeing employees.
But Calhoun predicted that Boeing would recover from the current crisis. The company has no plans to cut the dividend to conserve cash and remains “all in” on the Max. Re-branding the beleaguered plane would be “sort of silly,” he said.
Asked about the company’s plans for its proposed new midmarket airplane, or NMA, he said the planemaker is eyeing a new clean-sheet design. And the 62-year-old executive said he has told the Boeing board that he intends to work past age 65.
Boeing shareholders have had a rocky ride since Calhoun took over, especially this week as Boeing pushed back its expectations for the Max return to service by several months.
“It’s just a reality-based prognosis. I’m not trying to be conservative here,” Calhoun said. “I’m simply trying to put a reality-based set of numbers out there. You can attach this schedule to me.”
The delay was due primarily to the recognition that Max pilots would need simulator training, and not because of any new glitch, he said. Boeing said this month that it was recommending the training, reversing its previous position.
Investors are keeping a close eye on the schedule. Every month the grounding drags on means a slower recovery for Boeing and growing costs to store about 800 of the single-aisle planes. Boeing has already borrowed $21.5 billion since the first Max crash in October 2018 and is seeking to add another $10 billion in new loans.
Muilenburg was admonished by the Federal Aviation Administration in December for pursuing what the agency called a “return-to-service schedule that is not realistic.” The final determination on when the Max will fly again remains in the hands of U.S. regulators, Boeing emphasized in a statement Tuesday. The FAA said it hasn’t set a time frame for completing work on the Max.
While Boeing grapples with the challenges of the Max, it is also rethinking plans for its much-anticipated NMA. The company is starting from scratch, throwing out past design proposals in favor of a plane that better fits in today’s “competitive playing field,” Calhoun said.
Airbus SE has been making significant inroads with a new long-range version of its single-aisle A321neo plane, which can serve middle-distance routes.
“That NMA project is going to be a new clean sheet of paper,” Calhoun said. “We’ve had a couple years now go by since the first clean sheet of paper was taken to it. Things have changed a bit.”
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