737MAX Will Suspend Production, Boeing And Supply Chain Usher In "Colder" Winter

In the United States on December 16th, for many employees of Boeing and its supply chain employees, it was cold and threatening.

Because this day, Boeing finally announced the suspension of the production of 737MAX aircraft, since January 2020, the resumption of production time is uncertain. Boeing, one of the largest orders in the past century, was forced to walk to a day of suspension.

"737MAX's security recovery operation is the top priority of our work." Boeing China issued a statement on twenty-first Century economic report in December 17th.

Boeing admits that this will affect its supply chain, but Boeing believes that this has minimal impact on maintaining the long-term health of production systems and supply chains. "In fact, temporary shutdown is a stop loss." Qi Qi, an associate professor at Civil Aviation College Guangzhou, said that suppliers of engines, avionics, machinery and machinery on subsequent 737MAX will be hit. Whether the unknown Boeing will compensate the supplier?

Factory shutdown for the first time in 100 years

Boeing's factory in the outskirts of Seattle is Boeing's early aircraft production base. It was built in 1916 and has produced many early Boeing models, such as 707/KC-135, 727, 737 and 757. Today, many new models are mainly produced in Boeing Everett plant, and the main production line is the 737 series aircraft.

For more than 100 years, even if war broke out, even in the financial crisis, production is still here. However, from January 2020 onwards, the production line of the Centennial plant will cease operation for the first time.

In March 10th of this year, Ethiopia Airlines flight ET302 crashed out of control shortly after taking off. All 157 passengers and crew members were killed. This is the second air crash in Boeing 737MAX aircraft following the Indonesian lion air crash last October 29th. Subsequently, the 737MAX aircraft was banned from the world and has yet to be certified and resumed operation.

"The approval process for 737MAX to resume operations and determine the right training requirements must be comprehensive and robust, so as to ensure that our regulatory agencies, customers and flight public are confident in the upgrading of 737MAX." Boeing explained to the twenty-first Century economic report that "as we have said before, the schedule for certification and recovery will be decided by the FAA and the global regulatory authorities. We will continue to support this process with all our strength. Our responsibility is to ensure that all requests are met and to answer every question raised by the regulator. " However, in December 11th, the FAA announced that it was investigating the production of Boeing 737 MAX aircraft and confirmed that the aircraft would not be allowed to resume flight until the end of the year.

The 737MAX aircraft was made at a London factory. Before March this year, London factory's mission was amazing. The 737 series of aircraft was, after all, the best selling aircraft in the history of civil aviation. In twenty-first Century, the economic report inquired about Boeing official website. As of November 2019, the 737 series of aircraft acquired 15156 aircraft orders, 10565 aircraft were delivered, and 4591 aircraft were to be delivered. Most of the more than 4000 orders are 737MAX orders. Boeing's official website showed that as of November 2019, 737MAX had received 4932 aircraft orders, 387 deliveries and 4545 aircraft to be delivered.

The London factory should have worked overtime to complete the more than 4000 orders, but now it stops abruptly. After the crash, Boeing did not anticipate that the crisis would be so far-reaching that it had only once adjusted the production plan, from 52 aircraft to 42 in the first month. However, 737MAX's certification and recovery operation time has been postponed, postponed from June 2019 to August, and then turned into November and December. Now 2019 is coming to an end. The resumption of operation is still uncertain. The newly produced aircraft can not be delivered to customers. Boeing's parking lot is even being called to 737MAX.

Boeing revealed that about 400 aircraft are now in production and in storage. "As we have said before, if the duration of the grounded is longer than expected, we will continue to evaluate the production plan. "Boeing said that according to the current assessment results," decided to give priority to the completion of production and storage in the state of the delivery of aircraft, and from next month to start temporarily suspend production of 737MAX aircraft. "

Suppliers are affected.

"We believe that this has minimal impact on maintaining the long-term health of the production system and supply chain." Boeing said in a statement, "there are many reasons for this decision, including the uncertainty of the time and conditions for the delay of the certification until 2020, the resumption of operations and the global training and approval, as well as ensuring that we can give priority to the delivery of the aircraft that has been completed and stored. We will continue to assess the progress made in the resumption of operations at all time nodes and make corresponding decisions to resume production and delivery. "

Qi Qi thinks that because 737MAX's commercial re flight time is dragging on, the roadmap is clear but there is no timetable. If no production ceased, more resources will be consumed, and the market realisation of these manufacturing resources will be far from being expected. "From the Boeing point of view, temporarily stop production is" stop loss "behavior. Qi Qi believes that it can be expected that Boeing will turn its production line and manufacturing resources to mature 737NG after 737MAX's suspension of production, and is likely to persuade 737MAX's order users to "change" to NG. If order replacement and Boeing narrow body machine is delivered to restart, this is good for Boeing and its industry chain company.

But that remains to be seen. The most urgent thing is to stop the production line. What about the 12 thousand employees in London factory? Boeing told reporters that during the suspension of production, the Boeing employees affected will continue to carry out 737 of the relevant work, or temporarily assigned to other teams. Boeing will release its fourth quarter earnings report in late January next year, and will provide financial information related to temporary discontinuation.

When news of Boeing suspended production of 737MAX aircraft, the company's share price dived immediately. Boeing's shares fell 4.29% in December 16th. It is also conceivable that the performance of many companies in its supply chain is implicated.

It is bound to be the largest component supplier of Boeing. It is the 737 MAX production fuselage, backstepping device, wing leading edge and engine compartment. The annual revenue is nearly 80% from Boeing order. The company's share price also dropped by 2% in December 16th, due to the news of 737MAX's suspension.

Other suppliers such as Honeywell, Huck Searl, Woodward and so on provide auxiliary power system, airborne weather radar, composite material and backstepping device drive system. The French Sai Feng Group provides engine for 737MAX, and the British Senior company makes the fuselage for 737 MAX. The share price of these companies has also been fluctuated to varying degrees, but the specific loss remains to be disclosed by the company.

At present, the loss is mainly caused by operators, such as airlines and air leasing companies. It is understood that Southwest Airlines has reached agreement on Boeing, such as suspension, delay in delivery and other compensation issues, amounting to $125 million. TUI, Europe's tourism giant, also said in December 12th that if Boeing 737MAX failed to resume its flight in May next year, it would lose 400 million euros in the 2020 fiscal year. Tuyi group said in its third quarterly report, 2020 4

Before the end of the month, Boeing 737MAX grounded or lost 130 million euros. If the suspension order has not been lifted, the next fiscal year will receive an additional loss of 220 million -2.7 billion euros.