As setbacks for Boeing’s 737 MAX accumulate, uncertainty over its path to recertification continues to impact companies within Boeing’s US supply chain, says GlobalData, a leading data and analytics company.
While some companies attempt to solicit business elsewhere, others cut jobs in order to deal with reduced demand. For example, General Electric has moved towards Boeing’s rival, Airbus, hoping to solicit business supplying engines for Airbus’ A330neo, while Spirit AeroSystems laid off 2,800 employees as production of the 737 MAX was halted.
The latest issue arose on 9th March 2020, when Boeing’s suggestion for the resolution of issues with wiring bundles on the 737 MAX was rejected by the Federal Aviation Authority (FAA), fearing that they could cause a short circuit. Following this rejection, Boeing must develop a new proposal that addresses the issue, possibly implementing a design to separate the bundles, which could further delay the return to service of the 737 MAX. In addition, in February, Boeing vice-president Mark Jenks indicated that foreign object debris had been found in the fuel tanks of several 400 737 MAX airplanes in storage. These setbacks compound uncertainty regarding the return-to-service of the 737 MAX after it was grounded in March 2019.
Harry Boneham, Associate Analyst at GlobalData, comments: “Regardless of any possible further delay to the return of the 737 MAX, the primary cost of these issues is further reputational damage to Boeing. Public concern regarding the safety of the 737 MAX, compounded by ambiguity over the timeline its return to service, has driven airlines to look to competitors such as Airbus to fulfil their single-aisle aircraft demands.
“The subsequent exodus of customers is clearly exhibited by Boeing’s failure to secure any sales in January 2020 compared to 46 in January 2019. This is the first time since 1962 that Boeing has failed to secure any sales in a month, and stands in stark contrast to the 274 commercial aircraft sales secured by Airbus in January.
“Suppliers are also looking elsewhere for business, and Airbus announced in February 2020 that the company would be investing between €500m to €1bn on its A220 passenger jet in 2020 – having grown their stake in the program from 50.1% to 75% earlier that month by purchasing Bombardier’s stake.
“This announcement arguably serves as an indication that Airbus is endeavoring to capitalize on Boeing’s 737 MAX setbacks, and grow its share of the single-aisle passenger jet market. However, Airbus’s failure to secure any orders in February could signal that the disruption to the aviation industry caused by the Covid-19 outbreak is dampening the company’s capacity to capitalize upon Boeing’s difficulties.”