Boeing 737 MAXs are under constant efforts to clear inventory

MOSES LAKE, Washington (Reuters) – The future of Boeing Co’s newly approved 737 MAX rests in the hands of nearly 700 hard-working workers behind the gray doors of a three-bay hangar at a desert airport in Washington state.

Inside, in an endless 24-hour cycle, 737 MAX aircraft are undergoing maintenance and software and systems updates as required by the U.S. Federal Aviation Administration on this week’s order which lifted a flight ban imposed after two accidents, the airport director said.

In front, workers in bright yellow vests inspect the roughly 240 jets stored in giant grids at Grant County International Airport in Moses Lake – more than half of an inventory worth about $ 16 billion, according to investment firm Jefferies.

Analysts say unblocking up to 450 jets stored in total is crucial before Boeing can resume meaningful production of its traditional cash cow, a task complicated by the fact that buyers have in some cases left during mass. to the ground.

While parked on the tarmac, each jet is equipped with a red engine and wheel cover, a windshield screen to block the sun, and a small generator that powers cycles of fresh air and electricity through its systems – the aeronautical equivalent of life support.

“It’s a huge undertaking,” airport director Rich Muller told Reuters. “But this FAA consensus gave them a real shot in the arm. Everyone is really excited. ”

The work at Moses Lake is a cornerstone of an ongoing global logistics and financial strategy at Boeing to clear a backlog of more than 800 out of service 737 MAX jets. About 450 are owned by Boeing, and another 387 were in air service prior to the FAA’s grounding order in March 2019.

Around the world, Boeing teams are setting delivery schedules – and financial terms – with airlines having to scale schedules last year and fly on outdated airliners because they didn’t have the plane to meet the strong question as MAX grounding dragged on longer than the airline and Boeing executives expected.

But the jet is returning at a time when the coronavirus pandemic has hammered demand for air travel and new jets. Boeing also faces new European commercial fares and palpable distrust of one of the most scrutinized brands in the aviation industry.

“Airlines and the supply chain will not see major deliveries until 2022,” said Arndt Schoenemann, managing director of supplier Liebherr-Aerospace Lindenberg. “Right now, COVID is the biggest problem facing the industry.”

A Boeing spokesperson declined to comment beyond the steps of preparing the list before the 737 MAXs go to customers, which includes installing a flight control software update to address a system tied to both arrests, separating harnesses that posed a potential safety hazard and multiple tests including a test flight prior to a final FAA inspection.

WHITE TAILS

The airlines say it will take around two weeks to prepare each aircraft for service with maintenance and software updates considered, although Boeing has already deployed teams around the world to help companies prepare.

In a visual demonstration of the collapse in jet demand, workers at Moses Lake on Thursday launched a “white tail” 737 MAX – a jet with no buyer, or whose buyer has been changed – from a long line of planes flooded with bright liveries. of airline customers, from American Airlines customers to Norwegian Air. This week, Norwegian sought bankruptcy protection in Ireland.

Reuters counted 12 white queues at Moses Lake on Thursday, although sources say Boeing is concerned about 100 such aircraft in inventory, or more.

Boeing declined to comment.

The jets are also stocked at the Boeing property in the Seattle area and in San Antonio, Texas.

Boeing is in talks with several airlines, including Southwest, Delta and Alaska, hoping to stimulate demand for the jet. The deals are expected to include significant discounts, industry sources said. But analysts’ caution in cutting prices too far could upset other customers.

A sell-off could also depress the resale values ​​of such single-aisle jets, the cornerstone of a complex financing system that has attracted capital to the industry, fueled by relatively strong returns on aircraft that are seen as movable real estate.

To kick-start the recovery of the MAX and contain any fallout on the jet’s valuation while offering aggressive discounts to find new homes, Boeing would have to line up a handful of big deals with marquee customers that will put them in service for a long time.

The 737 MAX 8 has a list price of $ 122 million, but the market has long since abandoned the published prices due to increased competition. Most jets are privately sold well over 50% below the list price, and the new MAX discount could be greater, jet dealers said.

Slowing the recovery, the FAA, which in the past has faced allegations of being too close to Boeing, said it plans in-person inspections on each of the 450 aircraft, which could take at least a year to complete, extending the jets’ deliveries.

Grant County International has been a strategically important asset to Boeing since at least the 1960s, and every MAX built in the Seattle area has flown there for touch-and-go landings or other tests.

The airport and adjacent Boeing property have absorbed nearly 700 employees and contractors to help the ungrounded effort, compared to a handful, Muller said.

Meanwhile, Boeing is paying about $ 51,000 per plane per month to park its MAXs, he added.