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Boeing 737 Max woes will stretch into next year

Even after the aircraft have returned to the air, it will be necessary to deliver new aircraft to its customers. Until this backlog is cleared up, its earnings will suffer.
The company had its best-selling 737 Max grounded in March after two fatalities, this week said it will have to delay its efforts to get the plane back in the air because a new potential problem with the jet has been discovered during test.
Experts have been expecting the planes to come back in the air in August. The three US airlines that own 737 Max – Southwest ( LUV ) United ( UAL ) and American ( AAL ) airlines ̵
1; had canceled flights with this aircraft only through in early September.
But now a Boeing BA ] official confirmed to CNN Business that the company does not expect to submit a new software fix to the US Federal Aviation Administration for testing until September. "We think this can be updated through a software solution," the official said. The new time frame was first reported by the Wall Street Journal .

But it is not certain that a software solution will be the final solution.

  New bug discovered on Boeing 737 Max, sources say
Sources familiar with the testing process, CNN Business told this week that the new problem is a errors in a microprocessor that could push the nose of the plane to the ground. It is not known whether the microprocessor played a role in both clashes. But it is too large of a risk of not being treated, the sources say.

If the FAA determines that there should be a hardware solution beyond a software solution, it may further delay the return to service.

Boeing said it agreed with the FAA's decision to make further changes.

"Boeing will not offer 737 MAX for FAA certification until … it is safe to return to service," said the company's statement.

But even though there is only one software solution needed, it will probably be months after it is filed in September before the plane gets approval to fly again by the FAA.

This means that the earliest Boeing and airlines can hope to get the plane back, will be close to the end of the year.

"I don't know if I want to say the best scenario, but it's likely," said Jeffrey Guzzetti, a former FAA Accident Investigation Director.

  Boeing is open to change the name of 737 Max [19659025] Boeing is open to change the name of 737 Max

The delay will at least partly be due to The FAA and Boeing will be approaching simultaneous approval from authorities worldwide for the plane to fly again, Guzzetti said. More than 30 authorities from other countries have met in the United States to discuss the certification process.

Getting the FAA approval alone would be of limited benefit to Boeing, as more than 80% of the nearly 400 grounded jets are owned by foreign carriers.

But even when the plane is flying again, Boeing's problems are not over. It has continued to build 737 Max during the grounding, but it has not been able to deliver it to customers.

By the end of this year, Boeing will probably have approx. 400 built-in but not supplied Max jets in its inventory according to Cai von Rumohr, aviation analyst with Cowen. But it will not be able to deliver these jets until it first solves the aircraft in the hands of the airlines.

"Boeing's first priority is to prepare 381 aircraft in customer fleets for service," he said in a note this week.

And even when deliveries begin, it will take time to repair, test, and deliver all of these aircraft, says Jim Corridore, Director of Industrial Equity Research at CFRA Research. This means that the delivery delay is likely to extend well into 2020. And Boeing does not receive most of the cash from the sale of the aircraft before it is handed over to the customer.

"They won't clear the supply in a month or two," he said.

It will only add to the compensation that Boeing owes airlines to the founding and delays in deliveries, as well as the cost of the repair and certification process and any legal settlements with the families of the victims of the crashes.

"We look at numbers in billions," he said. "It is impossible to quantify it completely at this time."

Boeing is also facing the prospect of an expanded probe, with the Seattle Times reporting Friday that federal prosecutors are looking for subcontracting claims at a South Carolina factory making the Boeing 787 Dreamliners. A Boeing spokesman told CNN: "We are not commenting on legal issues."
Boeing is still far better than most companies that run out of the crisis. It had $ 7.7 billion. In cash at hand in late March. To maintain cash, the company has stopped repurchasing its shares.

Even with all the problems for the company, Boeing's shares are 13% for the year.

While firm orders for new commercial jets have almost stopped, it has continued to deliver other types of jets and it has a large backlog of previous orders that will take many years to work through.

"They have to take on debt, eat in cash," Corridore said. "As long as the aircraft comes into use, the company will eventually be fine. And everyone expects it to happen. But if it returns to normal in 2020 or not before 2021, it's hard to say."

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