BUSINESS
17/12/2019 3:43 AM IST | Updated 17/12/2019 4:16 AM IST

Boeing Will Temporarily Shut Down 737 Max Production

The company has no immediate layoffs planned when the production freeze goes into effect in January.

Boeing will pause the production of its 737 Max aircraft in January, the company said on Monday.

“Safely returning the 737 MAX to service is our top priority,” Boeing said in a statement. “We believe this decision is least disruptive to maintaining long-term production system and supply chain health.”

The New York Times and The Wall Street Journal were the first to report the news, noting the company made the decision after struggling to convince global regulators that the planes were safe to fly after two crashes that killed 346 people.

The 737 Max has been grounded around the globe since March following the accidents, which involved an Ethiopian Airlines flight that month and a Lion Air flight in October 2018.

The popular jetliner is used by many of the world’s biggest carriers, including most airlines in the United States, and the flying ban has resulted in thousands of canceled flights as regulators determine when the planes will be able to return to service.

But that process has taken far longer than Boeing anticipated, and the company has hit several major hurdles that could see the planes out of service for a year or more. Last week, Federal Aviation Administrator Stephen Dickson said the grounding would “extend into 2020” and pledged to ensure the safety of each aircraft before it goes into service. The FAA said last month it would personally certify each jetliner as it comes off the production line.

“We’re going to do it diligently because safety is absolutely our priority with this airplane,” Dickson told CNBC last week. “I’ve made it very clear Boeing’s plan is not the FAA’s plan.”

Boeing currently has about 4,500 orders for the 737 Max on backlog, according to the Journal. 

The grounding has already cost Boeing at least $8 billion, and the company has been working with airlines to compensate them for losses. Boeing reached a partial settlement with Southwest Airlines this month, which has 34 of the jets in its fleet.

The jetliner has been a flagship product for the company, representing tens of billions in sales, and Boeing has still been producing about 40 each month. The company said it has about 400 737 Max’s in storage and cautioned that, should the evaluation process continue longer than it expects, it would “continually evaluate our production plans.”

Boeing also said employees in its Renton, Washington, factory, where the 737 Max is constructed, would be reassigned to other projects around the region, avoiding any immediate layoffs.

“We remain fully committed to supporting this process,” the company said. “It is our duty to ensure that every requirement is fulfilled, and every question from our regulators answered.”

This article has been updated with comment from Boeing and additional details.