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A Boeing Co jet carrying 132 people crashed in China after a rapid descent. The headlines had a sense of deja vu, but with one important distinction. The Boeing jet involved in the crash is part of the generation of jets that preceded the company’s infamous Max, which was grounded across the globe for nearly two years after a pair of fatal crashes and remains sidelined commercially in China. The 737-800 NG model that crashed in China (NG stands for next generation) has one of the best safety records among any aircraft over its 25 years of operation. It’s not clear what caused the plane to plunge almost vertically downward, as appeared to have happened.
Much remains unknown about the crash, and it’s too early to speculate about the circumstances. The most important concern is the 132 people who were on board. Their families will want answers, and it will take time for investigators to sort through the details. While they do that, one of the more likely ramifications is that it will complicate the return of Boeing’s Max to China’s skies. China Eastern Airlines Corp, the operator of the crashed jet, has grounded its entire 737-800 fleet, signalling a preference for using blunt instruments to prioritise safety while the facts are determined. That approach implies additional caution will prevail when it comes to the Max.
China was only recently inching towards restarting passenger travel on Max — some three years after the country bolstered its reputation for aviation safety by being the first to ground the jet after its second crash. In December, China’s Civil Aviation Administration issued an airworthiness directive that opened the door for the Max’s return, and Boeing earlier this month flew the first Max into its completion and delivery center in Zhoushan since the grounding. Deliveries don’t appear to have restarted yet, though, meaning at a minimum Boeing seems likely to miss its goal of resuming them during first quarter.
The company continued to build Max planes during the regulatory review process but couldn’t deliver them without official approval. It had 335 Max jets in inventory as of its fourth-quarter earnings call in January. While it anticipated handing over the majority of those before the end of 2023, the timing and pace of deliveries to Chinese customers are “critical assumptions†to that outlook, Chief Financial Officer Brian West said at the time. A significant delay could materially curb Boeing’s cash-flow generation this year, particularly with deliveries of its 787 Dreamliner still on pause amid a separate Federal Aviation Administration review process. If Boeing struggles to deliver all the Max jets it has already built, that also throws into question the company’s goal of churning out 31 new ones a month by early this year and then evaluating further rate increase from there. Boeing had preliminary plans to boost Max production to 47 planes a month by the end of next year, Reuters reported. Max orders have rebounded as airlines elsewhere recover from the pandemic. Even so, that production pace looks aggressive without deliveries to China.
A clear timeline for Max production is important because the aerospace sector has already been struggling to ramp up output after a long Covid slump. Hiring challenges are proving particularly worrisome in the US Aerospace suppliers laid off workers by the thousands during the pandemic and are attempting to rehire them when the manufacturing industry as a whole is facing stubbornly high job openings that numbered 855,000 as of January. Companies including Raytheon Technologies Corp. have also flagged challenges in the casting and forging supply chains.
The fate of the Max and Boeing’s stock price pales in comparison to the human tragedy. But this is another painful day for a company that has had far too many painful days over the past three years.
—Bloomberg