Parts shortage hits Boeing 737 MAX production

SEATTLE (Reuters) -Boeing Co said on Wednesday that supply chain disruptions slowed production and deliveries of its 737 MAX cash-cow narrowbody plane in recent weeks, but it does not see its overall plan for the year being disrupted.

Grounded Boeing 737 MAX aircraft are seen parked at Grant County International Airport in Moses Lake, Washington, U.S. November 17, 2020. REUTERS/Lindsey Wasson

The U.S. planemaker also said China was close to clearing the 737 MAX to return to service, but progress with regulators and customers was delayed by stringent COVID protocols, not broader trade tensions between Washington and Beijing.

Boeing Chief Financial Officer Brian West told a Goldman Sachs conference it was grappling with shortages from multiple suppliers of a particular wiring connector, though overall the factory was primed to produce 31 jets monthly to plan.

“It’s a reflection of a crazy supply chain world that we live in right now,” West said. “It’s fairly localized and isolated, but we have options and we’re working them hard.”

“These things usually get resolved in a short time, and then we catch up and get movement,” he added.

The 35 aircraft Boeing handed over to customers in April – 28 of which were its best-selling 737 MAX – fell from the 41 jets delivered in March. Boeing separately raised doubts in late April that it would hit a 500-aircraft delivery target for the 737 MAX this year. [L2N2X12RW]

Delivering a swollen inventory of 737 MAX and 787 Dreamliners is vital to Boeing’s ability to emerge from the overlapping pandemic and safety crisis caused by the grounding of its best-selling model after fatal crashes in 2018 and 2019.

China, one of the top aviation markets in the world, has been a holdout in clearing the 737 MAX to return to commercial service. Boeing sold a quarter of its jets to China before the grounding and the years-long tit-for-tat tariff war.

“With China, without China, there’s robust demand,” West said.

“We still want to make sure we’re very sensitive to that part of the world,” he added. But when Boeing raises production, “it will be a function of our confidence in our supply chain, not the demand signals.”

UNLOCKING DELIVERIES

Boeing is meanwhile battling certification and industrial headaches across its jetliner portfolio. Production flaws have halted 787 Dreamliner deliveries for a year, cutting airline capacity. It is separately working to clear more than 300 737 MAX jets parked in inventory since the crisis.

The logjams have hurt cash flow while debt has soared, raising questions from customers and analysts in recent days over whether America’s largest exporter faces the prospect of a credit rating downgrade.

West said Boeing did not need to tap credit lines or raise equity immediately, but said “all options are on the table” such as an equity raise in the longer term as deliveries and production bounce back.

On 787, West said U.S. air-safety regulators were reviewing a comprehensive package of certification documents Boeing submitted, while the planemaker prepares to deliver the first jets – but he stopped short of predicting when deliveries would resume.

Industry sources say 787 deliveries were likely still weeks away.

“I can’t give you a date, FAA decides, but there continues to be good momentum and people are hard at work,” West said.

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