Boeing temporarily suspends 737 MAX production following FAA announcement

Click to play video: 'Production of Boeing 737 MAX planes temporarily suspended' Production of Boeing 737 MAX planes temporarily suspended
WATCH: Production of Boeing 737 MAX planes temporarily suspended – Dec 16, 2019

Boeing has suspended production of its grounded 737 MAX aircraft, after the Federal Aviation Administration announced that it would not approve the jet’s return to service before 2020.

The temporary shutdown is a move that will affect Boeing’s global supply chain, and is likely to present further complications for airlines who have lost thousands of dollars on missed and cancelled flights.

The announcement came after a congressional hearing on Wednesday, Dec. 11 in which lawmakers urged the FAA to take a harder line with Boeing, whose 737 MAX planes have been grounded worldwide since March, following two fatal crashes in five months that killed 346 people.

The crashes happened within six months of each other. In March, Ethiopian Airlines flight 302 went down, killing 157 people — including 18 Canadians — while Lion Air flight 610 crashed in October, killing 189 people on board.

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A Boeing worker walks in view of a 737 MAX jet Dec. 16, 2019, in Renton, Wash. Elaine Thompson / The Associated Press

Boeing said in an emailed statement Monday that safely returning the 737 MAX to service was its “top priority.”

“We know that the process of approving the 737 MAX’s return to service, and of determining appropriate training requirements, must be extraordinarily thorough and robust, to ensure that our regulators, customers, and the flying public have confidence in the 737 MAX updates,” it said, adding that it has around 400 airplanes in storage.

“We believe this decision is least disruptive to maintaining long-term production system and supply chain health.”

FAA Administrator Stephen Dickson said on Wednesday he would not clear the plane to fly before 2020, adding that the agency has an ongoing investigation into 737 production issues in Washington.

READ MORE: After fatal crashes, Boeing says it must ‘re-earn’ public’s trust

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Dickson said there are nearly a dozen milestones that must be completed before the MAX returns to service, U.S. officials told Reuters, and approval is not likely until at least February.

“When the 737 MAX is returned to service, it will be because the safety issues have been addressed and pilots have received all of the training they need to safely operate the aircraft,” Dickson said Wednesday.

The FAA came under fire after their analysis revealed it had an official estimate that there could be 15 more fatal MAX crashes over the next few decades if Boeing didn’t fix a critical, automated flight-control system at least five months before the second deadly crash.

Earlier this month, the FAA also proposed a civil penalty of more than $3.9 million against Boeing for installing non-conforming components on approximately 133 aircraft, which Boeing subsequently presented as ready for airworthiness certification.

Click to play video: 'Analyst says production halt of Boeing 737 MAX could have ‘substantial’ impact on U.S. economy' Analyst says production halt of Boeing 737 MAX could have ‘substantial’ impact on U.S. economy
Analyst says production halt of Boeing 737 MAX could have ‘substantial’ impact on U.S. economy – Dec 16, 2019

Boeing’s regular two-day board meeting began in Chicago on Sunday. At the time, the company said it could make an announcement on production plans as soon as late Monday.

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In July, Boeing reported a $3-billion second-quarter loss after the prolonged grounding of its second plane. By Oct. 25, it released a statement that outlined steps taken to prevent future crashes.

After a lengthy investigation, federal officials found Boeing’s flight-control system — known as a Manoeuvring Characteristics Augmentation System (MCAs) — automatically pushed the noses of the doomed aircraft down in response to faulty sensor readings. In a statement, Boeing said it redesigned the way Angle of Attack (AoA) sensors work with its MCAs.

Going forward, MCAS will compare information from both AoA sensors before activating, adding a new layer of protection, Boeing said.

READ MORE: FAA predicted more Boeing 737 MAX planes would crash — but still allowed them to fly

In addition, the aircraft manufacturer said MCAS will now only turn on if both AoA sensors agree, will only activate once in response to erroneous AOA, and will include an override system.

Prior to the crashes, Canadian airlines Air Canada, WestJet and Sunwing Airlines flew 41 planes of the type that crashed in Ethiopia. Air Canada had 24, WestJet flew 13 and Sunwing had four.

In October, Air Canada announced that it would keep the Boeing 737 MAX off its flying schedule until Feb. 14, citing “regulatory uncertainty” that will affect thousands of passengers.

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Will flights be affected? 

In the “short to medium run,” David Gillen, director of the Centre for Transportation Studies at the University of British Columbia Sauder School of Business, said Canadian travellers won’t notice an increase in flight prices — but it could affect prices in the long run.

Click to play video: 'FAA chief admits agency made a mistake not taking immediate action to prevent further Boeing 737 MAX crashes' FAA chief admits agency made a mistake not taking immediate action to prevent further Boeing 737 MAX crashes
FAA chief admits agency made a mistake not taking immediate action to prevent further Boeing 737 MAX crashes – Dec 11, 2019

Gillen, who also teaches transportation policy, said that after the initial grounding of the 737 MAX planes, prices soared between 15-20 per cent, where they’ve remained ever since.

The loss of capacity has already being fully capitalized into the fare structure,” said Gillen.

He noted that a permanent shutdown was highly unlikely, but would be costly for airliners like Air Canada, whose MAX planes made up about 20 per cent of Air Canada’s narrow-body fleet and would typically carry about 11,000 passengers per day.

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READ MORE: Will Boeing groundings make flight tickets more pricey? Experts say it’s possible

“An awful lot of airlines in the world had had planned on putting that particularly aircraft capacity into service,” he said.

“If that capacity is no longer there, it means that they’re going to have to scramble and get capacity from somewhere else.”

If Boeing were to invoke a permanent shutdown, he said another increase in prices would occur.

“Those fares have been increased in anticipation that the 737 capacity would come back online,” said Gillen.

Click to play video: 'Final report released on Boeing 737 MAX crash in the Java Sea' Final report released on Boeing 737 MAX crash in the Java Sea
Final report released on Boeing 737 MAX crash in the Java Sea – Oct 25, 2019

“If that’s not going to happen over a fairly significant period of time, then we might see an increase in fares in the longer term.”

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Helane Becker, an airline analyst with Cowen, said the temporary shutdown could make it difficult for airlines to grow if the 737 MAX isn’t re-certified through mid 2020.

Becker said it will take between two and four months for airlines to put the aircraft back in service once it has been re-certified, which means they could be out of commission through June 2020.

“One or two airlines may be able to do it within a month, but Air Canada has already stated they need at least four to six months. As a result, travellers will find fewer choices and higher fares when they go to book their trips,” she said.

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