Boeing plans to resume production of the 737 MAX jet before the worldwide grounding is lifted to allow subcontractors time to gear up and to work out any kinks in the supply chain, company officials told analysts.
"We're looking at starting the (production) line earlier than the actual lifting of the grounding," said Greg Smith, Boeing's chief financial officer, to analysts Jan 29 on the company's fourth-quarter earnings call.
"Keep in mind that these lines are empty. We'll start in position one, but very methodical, start bringing in the crews, get stability then slowly bring them back into play," Smith said. "We'll make that decision as we get closer to (returning the MAX) to service. But that's the game plan as we see it today."
The 737 MAX, Boeing's top-selling plane, has been grounded since March 2019 following two crashes that killed a total of 346 passengers and crew.
The U.S. Federal Aviation Administration (FAA) is expected to recertify the 737 MAX for commercial service by the middle of this year, but there is no date certain. Recertification by the European Union and other nations may lead to a staggered return to service, allowing the plane to fly in some jurisdictions but not others.
Through February 2019, Boeing said it has delivered about 370 MAX jets to 47 customers and has another 5,000 planes on order. About 400 planes were completed but not delivered before production was temporarily halted in January.
Smith said Boeing is working with about 600 companies in its supply chain to help them plan for resumption of production, including matters pertaining to personnel and materials. Boeing said it has set aside about $4 billion this year for increased expenses, including financial support to suppliers.
In a tight labor market, skilled workers may be hired away by other companies at higher wages, and that could complicate Boeing's resumption of production.
"Right now, it's really liquidity and where (suppliers) need help or support," Smith told analysts.
Boeing hasn't laid off any workers following the temporary halt in production, but some subcontractors have cut staff.
Spirit AeroSystems, builder of 737 MAX fuselages in Wichita, Kansas, laid off about 2,800 workers. The company was building 52 fuselages a month before production was halted and had about 100 awaiting shipment by rail to Boeing's plant in Renton, Washington, where final assembly is completed.
Boeing has ordered 216 fuselages this year and plans to lend Spirit Aerosystems $225 million this quarter, according to company filings.
Precision Castparts, a maker of high-performance alloys, has laid off about 300 workers. Arconic, a maker of jet engine parts, will decide this summer if cutbacks are necessary, according to regulatory filings.
GE and France's Safran announced plans to build jet engines for about 20 MAX planes a month, about half their output last year. Last week, GE announced that the production halt will cost the company about $2 billion in lost revenue.
Other suppliers have continued production at reduced rates and stockpiled parts to assure an orderly restart.
Investigators believe the 737 MAX's anti-stall device, called the Maneuvering Characteristics Augmentation system (MCAS), erroneously pointed the nose of the planes down and into a fatal plunge.
Boeing said it has completed about 900 test flights with updated software for the anti-stall system totaling about 1,700 flight hours. In addition, Boeing said the new software has undergone 30 flight simulator sessions totaling about 140 hours with regulators from around the world.
