Recruitment agencies of Chinese airlines told the South China Morning Post (SCMP) that plans to hire foreign pilots for Boeing’s 737 Max have been put on hold since the aircraft was grounded nine months ago following two crashes.
China’s aviation market is one of the fastest-growing in the world. Airlines in the country were ecstatic when their fleets were updated and expanded with 737 Max planes but have since become irritated in the prolonged grounding.
Now new concerns are developing behind an uncertain timeline that could push the groundings well into 2020.
We reported on Monday morning that Boeing could temporarily halt the production of the aircraft as it would suggest groundings could last a lot longer than previously thought.
US regulators recently criticized Boeing for providing unrealistic timelines.
Andre Allard, president of AeroPersonnel Global in Montreal, said, “we’ve seen airlines suspend recruitment of 737 pilots…Many of these airlines had the MAX on order. That evidently changed their plans” as the production of the plane could be halted.
SCMP said by late 2016, Chinese airlines had more than 1,000 foreigners piloting the planes.
The Federal Aviation Administration said the 737 Max wouldn’t complete required approvals until 2020.
As the timeline of ungrounding is likely pushed out, and production cuts could be imminent, this could be more bad news for Boeing as it appears airlines in China are limiting their expansion of the 737 Max.
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Sources have told The Wall Street Journal that Boeing could temporarily halt production of the 737 Max amid concerns the timeline of ungrounding the aircraft could be pushed further out. The decision to disclose the fate of the 737 Max production could arrive as early as Monday.
Boeing hosted a regular board meeting on Sunday in Chicago. Sources said the fate of the 737 Max production comes days after US regulators criticized Boeing for providing unrealistic timelines for when the plane will return to the skies.
In April, Boeing slashed production by 20% from 52 to 42 planes per month. A more extended cut or even production halt could be absolutely damaging to the global aerospace industry, as any reduction in planes could ripple down the supply chain and cause financial hardships for suppliers.
Boeing’s board meeting is expected to conclude on Monday. Sources weren’t exactly sure when the production-related announcement will be released.
“We continue to work closely with the FAA and global regulators towards certification and the safe return to service of the Max,” Boeing stated. “We will continue to assess production decisions based on the timing and conditions of return to service, which will be based on regulatory approvals and may vary by jurisdiction.”
We’ve noted in the past that production cuts could have severe consequences for the US economy. Over 600 suppliers provide 600,000 parts needed for each plane; the brunt of the shock would be seen down the chain at smaller firms.
Some Max suppliers have already cut production rates after Boeing reduced plane output by 20% in April. There are other reports that some suppliers have already furloughed employees and shut down equipment as the groundings enter the ninth month.
“It’s easier to ramp down gradually and then ramp back up,” said John Scannell, chief executive of Moog Inc., which makes control motors for the MAX.
The upcoming production decision isn’t easy for Boeing since two of its Max planes experienced flight control system malfunctions and crashed in the past year or so, killing 346 people.
With no clear timeline on when the planes can return to the skies, and production likely slashed in 2020 – this could further weigh on Boeing shares.
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