Finance

Boeing to Stop Production of 737 Max Aircrafts

The America-based multinational airplane manufacturing firm, Boeing has announced that the team is contemplating to halt the production of its best-selling aircraft named 737 Max by next month of the fast-approaching new year 2020. The ban was imposed by the Federal Aviation Administration (FAA) in March after two fatal air crashes which killed hundreds of passengers. The authority blamed the aircraft software for the crashes.

According to the latest reports, the strategic decision has been taken by the globally reputed aircraft manufacturing firm in response to the FAA’s statement which stated that it should continue with the inspection procedure of the planes till next year. The firm affirmed that instead of putting efforts and resources on aircraft production, it would direct its efforts to sell off the stored planes in the first place to liquidate earnings. The firm revealed that during the grounding phase, the firm has been in continuous production of the aircraft and has about 400 airplanes ready in the storage house.

The news has left the firm’s economic ecosystem in a crippling state as the shares of the firm suffered a major downfall in the value on Tuesday. The incident had surged up the pressure on the CEO of Boeing, Dennis Muilenburg who was compelled to step down from his Chairman position in October when the global grounding of 737 Max aircraft jolted the firm’s economy.

Boeing affirmed that it would temporarily reassign the 12,000 workers working at the Renton, Washington factory where the 737 Max aircraft are produced. The company stated that it has no intention to lay off, suspend, or furlough the workers’ team of the factory.

“We have previously stated that we would continually evaluate our production plans should the MAX grounding continue longer than we expected. As a result of this ongoing evaluation, we have decided to prioritize the delivery of stored aircraft and temporarily suspend production on the 737 program beginning next month,” quoted Boeing.

The 737 Max grounding incident has affected the share value of the firms which have trading relations with Boeing. Leading a car manufacturing firm, Rolls-Royce, which provides engines to Boeing, faced a downfall of 1.5% in its share value. Other firms that experienced a plummeting share value included Melrose Industries (1.1%), Meggit (0.4%), and Safran (3.8%).

The analysts of the Bank of America opined that the aircraft production shutdown is likely to hit the firm with a whopping cost of €300m. “A pause in the 737MAX would be disruptive to the supply chain. A pause also could make it more difficult for the supply chain to get back to previous production rates,” remarked the analysts.

“The FAA and global regulatory authorities determine the timeline for certification and return to service. We remain fully committed to supporting this process. It is our duty to ensure that every requirement is fulfilled, and every question from our regulators answered,” said Boeing about the FAA investigation.

The firm has warned its investors that the suspension of production of the aircraft will directly depend on the time FAA takes to lift the ban.

Tags

Jodie Miller

Jodie Miller is experienced journalist. She holds double degree in journalism and communication. She joined our team as a content curator. She enjoys writing and curating contents related to finance and forex world.
Back to top button
Close