Boeing 737 Max Ungrounding Pushed Back Again; WSJ Sources Say Early 2021
One of the perverse features of the Covid-19 airline industry wrecking ball is that it makes the colossal mismanagement of the Boeing 737 Max less consequential. According to the Seattle Times, orders for 800 planes have been cancelled or designated as doubtful since the start of 2020.
Nevertheless, it’s still not a good look that the 737 Max out of the regulatory doghouse date keeps being pushed back. We’d speculated that it would take most of 2020 if not longer before the plane was allowed to fly again, given the nature of the problems with the software and critically, the related hardware. Supposedly knowledgeable parties pooh-poohed that idea.
And despite having been slapped down by the FAA for trying to pressure the agency with overly optimistic messaging, Boeing again has been forecasting approval dates that the FAA is rejecting. Boeing’s most recent “good to go” estimate was mid-September. That’s now being officially pushed back both due to additional FAA review plus a 45 day public comment period. Again, in a sign of Boeing hubris, the aircraft maker had pushed for the comment period taking place after the FAA had green-lighted the plane. Not only does that obviously render the comment process moot, but not surprisingly, that’s not how the agency normally does things.
Having said all that, there’s an interesting disconnect in the press accounts of Boeing’s latest embarrassment. The Seattle Times and the Wall Street Journal disagree on when the FAA is likely to allow the 737 Max to fly. The Seattle Times says the plane is not likely to be deemed airworthy before mid-October, and admittedly does not give any other time estimate. The Journal, citing “government and industry officials” says the plane is not likely to be carrying passengers before early 2021. The Seattle Times account was published first but the Wall Street Journal labels its story an exclusive, as in it is depicting its later report as more authoritative.
Frankly, I find the Journal’s estimate more realistic simply based on a summary of what has to happen…which is set forth in the Seattle Times. One important novel feature is the need for foreign regulator signoff. Recall that before the FAA lost credibility by being the last major regulator to ground the 737 Max, its certifications were accepted without question by other national regulators.
Now other major authorities, particularly the EU’s, China’s and Canada’s regulator have all said they want to make additional reviews. The FAA could approve the 737 Max for passenger flight without waiting for the other regulators to sign off, and what happens may be less consequential given the severely depressed state of air travel. But if the FAA issues a go-ahead much in advance of other regulators, it runs the risk of alienating gun-shy consumers. Recall that Delta didn’t buy any 737 Max planes, so there’s no risk of last-minute 737 Max substitution for Delta passengers.
As you can see from the Seattle Times, there are still a lot of moving parts in the approval process:
The FAA said Tuesday it will soon formally publish the proposed design changes to the Boeing 737 MAX flight control system as well as proposed new pilot procedures, and will allow 45 days for public comment ahead of clearing the jet to fly passengers again….
After the public comment period closes, the FAA will take some weeks to review the comments and respond to them in a public posting in the Federal Register.
The remaining steps then include a report issued by both the FAA and a panel of international regulators — the Joint Operations Evaluation Board (JOEB) — on proposed new training procedures for 737 MAX flight crews. That will also be posted for public comment.
In addition, the 737 MAX Technical Advisory Board (TAB) — consisting of experts from nine civil aviation authorities worldwide as well as the National Aeronautics and Space Administration (NASA) and the FAA — must review Boeing’s final submission of documents on the MAX design changes to evaluate compliance with all FAA regulations.
Only then will the FAA be able to issue an Airworthiness Directive, which will lay out for airlines exactly what design changes must be installed on each airplane before it may re-enter commercial service.
This directive would finally be Boeing’s long-awaited clearance to reenter service.
With that, U.S. airlines could start taking their parked MAX planes out of mothballs and start training their pilots on the new procedures. Scheduled domestic passenger flights on the MAX could follow some 30 to 60 days later.
As I read this, at best, the 737 Max TAB review could happen in parallel with the other reviews. However, it would seem unrigorous to proceed before at least the domestic comment period was completed, particularly since unions or whistleblowers could raise important challenges. Recall that the Southwest pilots union has taken the unusual step of suing Boeing.
So back of the envelope….two weeks for the FAA to post the proposed changes. 45 days for the comment period. At least two weeks to write up the report on the comments. That’s already early-mid October. If you assume the reviews that include foreign regulators come after that, that’s at least two more months, assuming a 30 day comment period and two weeks on either end (to frame and announce the comment period and to review results and publish a report). So that takes us to mid-December, which means nothing will get going till the holiday period is over.
In other words, I don’t see how anyone can be fantasizing that the 737 Max will be carrying passengers before February 2021, and the odds favor later than that.
So no wonder the Journal is taking a more sober view:
Boeing Co.’s 737 MAX isn’t likely to resume widespread passenger flights until early next year—nearly two months beyond previous expectations—due to another regulatory delay, according to U.S. government and industry officials.
That means the jets are expected to be grounded at least as long under the plane maker’s chief executive, David Calhoun, as under his predecessor, Dennis Muilenburg, who was ousted at the end of 2019 following repeated delays in getting the plane back into service.
The latest timeline, these officials said, anticipates the Federal Aviation Administration won’t finish work to lift its March 2019 grounding order until late October or early November, because the agency has decided to ask for public comments before finalizing software and hardware changes. Regulators overseas could take days or weeks longer to concur in those decisions.
The Journal appears to have missed that foreign regulators are also planning a public comment period. Or perhaps they assume it’s going to take place in parallel with the US public comments. But that’s politically risky and with the airplane biz in hibernation anyhow, what’s the rush? Plus Europe is on holiday in August, another impediment to moving forward with alacrity.
Benzinga nevertheless reported a wave of large option bets, largely bullish, after the FAA announcement. I’d like to know what they are smoking, although in fairness, Boeing keeps blowing a lot of smoke and Boeing is also highly motivated to do everything it can to prop up its stock price. Or maybe these are some remaining Robinhood punters who have not yet blown themselves up.
We’ll see who has the better guesstimate in due course. In the meantime, the Seattle Times reported that industry analyst Ken Herbert of Canaccord Genuity forecast that Boeing would make only 40 737 Max deliveries, assuming the old mid-September FAA greenlight. It’s hard to make an upbeat case if Boeing can’t yet expect buyers to pay for planes.