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Technology Stocks : Boeing keeps setting new highs! When will it split?
BA 179.11-1.8%4:00 PM EDT

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From: John Koligman5/30/2024 7:07:03 PM
   of 3677
More cash burn for longer?

FAA won’t clear Boeing to increase 737 Max production for several months, agency head says


  • Boeing’s departing CEO Dave Calhoun and other top leaders met with the Federal Aviation Administration to present its safety plan.
  • The FAA in February gave Boeing 90 days to come up with a quality improvement plan in the wake of a near-catastrophic door plug blowout on an Alaska Airlines flight in January.
  • Boeing spelled out improvements in employee training, platforms for workers’ concerns and the reduction of out-of-sequence work

Boeing 737 Max 8 fuselages manufactured by Spirit Aerosystems in Wichita, Kansas are transported on a BSNF train heading west over the Bozeman Pass March 12, 2019 in Bozeman, Montana.
William Campbell | Corbis News | Getty Images

It will likely be months before the Federal Aviation Administration clears Boeing to increase production of its bestselling 737 Max, the head of the agency said Thursday.

The FAA in January barred the manufacturer from boosting production of the planes weeks after a door plug blew out midair from a new 737 Max 9, just minutes into an Alaska Airlines flight. Federal safety investigators found that the bolts that hold the panel in place appeared not to have been installed before the plane was delivered to Alaska Airlines last year.

Boeing CEO Dave Calhoun and other top company leaders met with FAA Administrator Mike Whitaker and other agency officials earlier Thursday to present a quality improvement plan that the agency gave Boeing 90 days to produce, in which the company outlined its efforts to improve staff training and production practices at its factories.

“We will not approve production increases beyond the current cap until we’re satisfied,” Whitaker said. He said there isn’t a timeline but it wouldn’t likely be in the next few months.

Whitaker said at a press conference after the roughly three-hour meeting that Boeing’s work was far from complete and that the strong agency oversight of the company would continue.

Whitaker’s comments suggest a long road ahead for Boeing to ensure manufacturing quality. Meanwhile, it’s grappling with a crisis that has drained cash from an iconic U.S. company eager to improve its reputation after two fatal Max crashes in 2018 and 2019 killed 346 people. Whitaker is scheduled to brief lawmakers on the House Committee on Transportation and Infrastructure on June 4.

“Boeing has laid out their roadmap, and now they need to execute,” he said.

The FAA said its senior leaders will meet with Boeing every week to review their performance metrics.

Federal Aviation Administration Administrator Mike Whitaker speaks at a news conference on the FAA’s work to hold Boeing accountable for safety and production quality issues, at the Federal Aviation Administration Headquarters on May 30, 2024 in Washington, DC.
Andrew Harnik | Getty Images

Boeing has reduced its production of the Max to stamp out production flaws, improve manufacturing processes and address increased FAA oversight.

Resulting aircraft delays have meant airline customers, such as United and Southwest, have had to redraw their growth plans.

Boeing has produced an average of 21 Max planes a month over the last three months, according to an estimate from Jefferies, well below the target rate of around 38 per month that it disclosed in mid-2023.

Lower production drives up costs, and fewer aircraft deliveries deprive the company of cash because airlines pay for the bulk of the plane’s price when they receive it.

Boeing Chief Financial Officer Brian West on May 23 said that the company expects to burn cash this year instead of generating it. For the current quarter alone, Boeing expects to use about $4 billion.

Boeing executives have acknowledged that the new plan won’t turn things around immediately.

“The 90-day plan ... is not a finish line,” West said at an investor conference last week. “We look forward to the feedback that we’ll get after next week.”

Boeing’s report detailed steps it’s taken to invest in its workforce, which is composed of thousands of new employees after experienced staff took exit packages during the pandemic. The manufacturer also said it would improve safety culture and eliminate defects.

The company said it has added 300 hours of training material and introduced workplace coaches. It said it is also clearing more time on managers’ schedules to be present on factory floors instead of in meetings.

The company said it has also reduced so-called traveled work, where required tasks on the planes are done out of sequence.

“We are confident in the plan that we have put forward and are committed to continuously improving,” said Stephanie Pope, chief executive of Boeing’s commercial airplane unit, who was appointed in March after an executive shake-up at the company. “We will work under the FAA’s oversight and uphold our responsibility to the flying public to continue delivering safe, high-quality airplanes.”

The manufacturer also included in its report information about factory “stand-downs,” in which it paused work to have conversations about potential improvements on production lines with employees. The manufacturer implemented those brief work pauses in the months after the Alaska Airlines door plug blowout.

Calhoun, who said he would step down by the end of the year, told staff in April that the company has received more than 30,000 “ideas on how we can improve” and that “speak up submissions” — concerns raised by staff — and comments were up 500% over 2023.

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