Insight: Monday 29 June 2020: A Big Week for Boeing and the MAX |

News: FAA test flights of the Boeing 737 MAX will begin today to determine whether the aircraft will be approved for a return to service in the United States. The test flight process is scheduled to be more rigorous than normal flights, as the eyes of the world are now squarely on the FAA. Additional flights for EASA and Transport Canada may be required, with scheduling to be dependent on border closings and pandemic precautions, although it is probable they will review the data from the FAA flight and tentatively approve the aircraft to return to service pending other modifications and later test flights in early 2021. Boeing needs the MCAS system and improvements to its flight control systems to be perfect after 15 months of having the aircraft grounded. Anything other than a perfect flight would be an embarrassment to Boeing after such a long period on the ground and scores of internal test flights by the company. We fully expect Boeing to pass the tests with flying colors and that the MAX will be approved for a return to service sometime next month. With about two months of preparation required to repair the existing aircraft and re-train pilots, we would expect a return into service by airlines in September or October if all goes well. The industry rumor mill indicates that international regulators require additional modifications to the aircraft, but are willing to compromise with the FAA to allow the aircraft to return to service, but require those modifications for all aircraft during 2021. Analysis It is critical for Boeing to have the MAX back flying. Every month that the MAX is grounded has cost the OEM in penalties, and delivery delays of more than one year have now enabled carriers to cancel orders without penalty. Boeing is fortunate that Airbus could not accommodate the additional demand during the height of the MAX crisis and since the COVID-19 crisis, demand has fallen off the cliff. Boeing still has a major problem in that the 370 or so aircraft in the hands of customers are the equivalent, after 15 months, of a new aircraft entering the fleet. With demand from COVID-19 causing schedule cutbacks, this will likely result in grounding other aircraft until traffic warrants additional aircraft entering the fleet. In addition, Boeing built 450 aircraft during the grounding, each of which needs to be modified and delivered to customers, some of whom are asking for deferred deliveries. But Boeing also needs to keep the assembly line going and its supply chain alive, even at lower rates, to maintain its operations without more losses. Losing key suppliers is not an option, and Boeing will likely build some “while-tail” aircraft during the pandemic with airlines canceling orders at every opportunity. The resumption of production at Boeing is at a low rate, likely to average only 12 aircraft per month for the remainder of 2020, and a slight uptick for 2021 - if passenger confidence can be restored. But this week, Airbus' CEO indicated that they don’t believe demand will reach 2019 levels before 2025, one of the more pessimistic forecasts we have seen. Insight The good news is that narrow-body aircraft will lead the industry’s return as domestic traffic and demand will likely resume well before international traffic and demand for wide-body aircraft. We will likely even see narrow-body aircraft pressed into service on some routes that formerly utilized wide-body aircraft given the extended range capabilities of newer models. The return of the MAX is critical to Boeing’s future. Additional modifications to the MAX requested by EASA and Transport Canada will be expensive, likely ensuring the program remains unprofitable over its expected short production life. But Boeing’s financial picture will improve once program cash flows turn positive, rather than negative. Unfortunately, that won’t happen until about 2023, when the program ramps up to perhaps half of its former goals. Until then, 2021 will include the costs of modifications to satisfy EASA and Transport Canada, and continued low production rates through 2022 as the 850 or so completed aircraft can find homes in a market with virtually no demand for new aircraft. Of course, all of that is subject to successful test flights, perhaps beginning later today. Boeing needs to ace this important test.

US Flight Planner - US DoT On-Time Data	Airbus vs Boeing - Official OEM Data
US Airline Schedule Performance - US DoT Data	Daily OEM Production & Deliveries -

Subscribe To Our Newsletter

Related News

Subscribe To Our Newsletter

Related News

JetZero’s Buzzing Week In Farnborough

MHIRJ Starts Evaluating CRJ Successor

Rolls-Royce’s Option: Embraer or JetZero, Not the Duopoly