Boeing Co.’s 737 Max family of passenger jets could remain grounded in the U.S. at least through April, House lawmakers said Thursday after they were briefed by aviation regulators.
Flights won’t resume until the planes receive updated flight control software that Boeing and the Federal Aviation Administration are racing to finalize, Pete DeFazio, the Oregon Democrat who chairs the House Transportation and Infrastructure Committee, and Missouri Republican Sam Graves, that panel’s ranking member, said after a briefing by FAA officials on Thursday.
That process could last for six weeks or more depending on additional training needed for pilots, said Rep. Rick Larsen, the Democratic chairman of the panel’s aviation subcommittee whose district includes Boeing’s campus in Everett, Wash.
“I know the software fix is going out in a couple of weeks and going fleetwide is going to take at least through April,” Larsen told reporters after he and other members of the committee were briefed by FAA Acting Administrator Daniel Elwell and others.
Boeing has temporarily halted deliveries of the jetliner because of the grounding. “We continue to build the 737 Max while we’re assessing how the situation — including any potential capacity constraints — will impact our production,” spokesman Chaz Bickers said.
U.S. carriers moved swiftly to comply with federal orders grounding their Boeing 737 Max aircraft and shift passengers to other flights. The Max makes up about 3 percent of the mainline fleets for three U.S. carriers: American Airlines Group Inc., Southwest Airlines Co. and United Continental Holdings Inc.
The FAA on Wednesday reversed course and grounded Boeing’s 737 Max family of narrow-body jets. Elwell said the decision was based on new evidence that showed the plane that crashed Sunday in Ethiopia behaved similarly to another 737 Max that crashed five months ago in Indonesia, operated by Lion Air.
Boeing is preparing fixes to anti-stall software that baffled pilots of the downed Lion Air jet by pitching the plane’s nose down dozens of times before it crashed in the Java Sea off the coast of Indonesia in October. The system was activated by a reading from a single faulty sensor, without any pilot input.
Elwell said Wednesday the FAA was hopeful the software update would be ready “within a couple of months” and expressed optimism it would mitigate risks experienced by pilots. He also noted that investigators have not yet drawn a clear link between the system that malfunctioned prior to the Lion Air crash and the Ethiopia accident.
The lawmaker comments came after President Donald Trump said earlier on Thursday that the U.S. had to take a “cautionary route” after the plane was involved in two fatal crashes, and that he hoped the grounding would be temporary.
“I hope it is going to be for a short period of time,” Trump told reporters gathered in the White House on Thursday. “They have to find out what it is.”
When Boeing’s Dreamliner was grounded in 2013, it took more than $20 million and three months to fix the problem. The crisis over its 737 Max jet could be even harder to manage, given the incalculable reputational risk after two fatal crashes.
The Dreamliner had battery problems but never crashed.
The short-term costs such as a software fix to the plane are likely to be manageable for Boeing, but the bigger financial unknown is whether airlines lose confidence in the Max, the company’s best-selling jet. Some 4,600 planes are on order, accounting for about $550 billion in future revenue.
Boeing stocks dropped 1 percent to $373.30 on Thursday. Boeing shares are down more than 11 percent so far this week, and had lost about $29 billion in market value. The shares still have outpaced the market in 2019, and account for 14 percent of the Dow’s increase so far.
The immediate question for Boeing investors is whether the grounding of the planes and crash investigations will have just a short-term effect on Boeing shares and finances, or have a longer-term impact.
“We think an investment in Boeing stock should take into account its long history of safe flight, a strong book of business and strong demand dynamics,” said Jim Corridore, an equity analyst at CFRA.
“Reputationally and financially, this is painful,” said Richard Aboulafia, vice president of analysis at Teal Group Corp., a consulting firm.
Boeing could also face lawsuits from the families of passengers who died in the disasters.
The longer it takes to find a solution, the higher the price tag. The battery fix for the Dreamliner jets amounted to $465,000 per plane, according to Carter Copeland, an analyst at Melius Research. Based on those costs, he estimates that Boeing could spend nearly $1 billion to resolve issues with the 737 Max fleet.
Airlines, which have 350 of the planes in their fleets, have also begun to demand compensation for their losses during the grounding. It costs an estimated $1 million to lease a replacement jet for three months.
“It’s quite obvious that we will not take the cost related to the new aircraft that we have to park temporarily,” said Bjorn Kjos, chief executive of Norwegian Air, which had to take 18 of the planes out of service after an order from European regulators Tuesday. “We will send this bill to those who produce this aircraft.”
Information for this article was contributed by Ryan Beene, Erik Wasson and Mary Schlangenstein of Bloomberg News, by Damian J. Troise of The Associated Press and by Natalie Kitroeff of The New York Times.
Business on 03/15/2019
Print Headline: Software upgrade planned for jets
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