Boeing’s 737 crisis deepens as production stops for first time in two decades

Boeing’s 737 crisis deepens as production stops for first time in two decades
Boeing, which builds the 737 MAX aircraft south of Seattle, said it would not lay off any of the roughly 12,000 employees there during the production freeze. (Reuters)
Short Url
Updated 17 December 2019

Boeing’s 737 crisis deepens as production stops for first time in two decades

Boeing’s 737 crisis deepens as production stops for first time in two decades
  • Boeing would not lay off any of the roughly 12,000 employees during the Seattle production freeze
  • Boeing did not say how long the shutdown might last

SEATTLE/WASHINGTON: Boeing said on Monday it would suspend production of its best-selling 737 MAX jetliner in January, its biggest assembly-line halt in more than 20 years, as fallout from two fatal crashes of the now-grounded aircraft drags into 2020.
Boeing, which builds the 737 south of Seattle, said it would not lay off any of the roughly 12,000 employees there during the production freeze, though the move could have repercussions across its global supply chain and the US economy.
The decision at a two-day board meeting came after the Federal Aviation Administration (FAA) refused to approve the jet’s return to service before 2020 and delivered what was seen as a public rebuff to Boeing’s hopes of moving faster.
The 737 MAX has been grounded since March after two crashes in Indonesia and Ethiopia killed 346 people within five months, costing the plane manufacturer more than $9 billion so far.
The decision to halt production will have little immediate impact on airlines that have already seen deliveries halted, forcing many to cancel flights or lease older replacements.

But it marks a deepening of a crisis that has already seen Boeing’s fastest-selling jet grounded worldwide, its safety record scrutinized, customers pressing for compensation and its cornerstone relationship with the FAA placed under strain.
It also threatens to hit US economy, with House representative Rick Larsen calling Boeing’s decision “a body blow to its workers and the region’s economy.”
“The only saving grace is the Boeing leadership has promised not to lay off any workers. I am ready to work with Boeing workers to ensure ... they will have access to the necessary resources in the event of a prolonged shutdown.”
Until now Boeing has continued to produce 737 MAX jets at a rate of 42 per month and purchase parts from suppliers at a rate of up to 52 units per month, even though deliveries are frozen until regulators approve the aircraft to fly commercially again.
Boeing did not say how long the shutdown might last, stressing this was up to the FAA. Previous efforts to predict when the 737 MAX might return to service after software training changes had drawn a sharp response from the US regulator.
The FAA said it would not comment on what it described as a Boeing business decision but would continue to work with global regulators to review proposed changes to the 737 MAX.
“Our first priority is safety, and we have set no timeframe for when the work will be completed,” the agency said.
Analysts said the shutdown was inevitable after Boeing was forced to abandon its end-year goal for returning to service.
“It is not a surprise that they don’t continue producing planes that don’t have a home,” said Adam Pilarski, senior vice president at Virginia-based consultancy AVITAS.
After holding out for months by keeping its factory lines running at optimum speed for a quick return, Boeing said it had decided to put emphasis on delivering some 400 planes that have been produced and stored, once the FAA gives the green light.
Such an emphasis would most quickly release much-needed cash for Boeing, but could cause other problems when production resumes, industry sources said. Supply chains are fragile due to record demand and abrupt changes in speed often cause snags.
Boeing did not say what extra financial impact the 737 MAX shutdown would have ahead of annual results due in January.
A spokesman said it would continue production of a military derivative of the 737, the P-8 maritime surveillance jet.
Airlines with 737 MAX jets and orders also face added uncertainty after already scaling back flying schedules and delaying growth plans.
Southwest Airlines, the largest 737 MAX customer, said last week it had reached a compensation agreement with Boeing for a portion of a projected $830 million hit to operating income in 2019 from the grounding.


Careem welcomes Saudization of ride-hailing sector, eyes further investment

Careem welcomes Saudization of ride-hailing sector, eyes further investment
Updated 9 min 45 sec ago

Careem welcomes Saudization of ride-hailing sector, eyes further investment

Careem welcomes Saudization of ride-hailing sector, eyes further investment
  • Careem said the company had been affected by the pandemic because workers stayed at home and cut down on their travel

DUBAI: Ride-hailing service Careem has welcomed a government decision to fully localize the sector in the Kingdom, saying the move will help to create more jobs for Saudi drivers.

The Saudi Ministry of Transport said the new rule would have limited impact as citizens already made up 96 percent of the workforce in the ride-hailing sector.

“We are proud that over 100,000 Saudi nationals are finding income-earning opportunities with Careem each month,” a Careem spokesperson told Arab News. “We’ve worked hand-in-hand with the Transport General Authority and Ministry of Human Resources and Social Development to help the Kingdom achieve its ambitious agenda, and applaud the efforts the government is making to support Saudis working in the ride-hailing sector.”

The spokesperson added that Careem planned to continue investing in the Kingdom with a greater range of transportation and delivery services. 

Although Careem did not give specific numbers for its operations in Saudi Arabia, it said it had 33 million registered users in 13 countries across the region and operated in 28 Saudi cities.

Ibrahim Manna, managing director of global markets at Careem, said the company had been affected by the pandemic because workers stayed at home and cut down on their travel.

“COVID-19 has impacted our ride-hailing, starting in March,” he told Arab News. “This is a natural result of lockdowns, curfews and other limitations of movement, changing user behavior and habits in daily life.”

But while the ride-hailing service decreased, food delivery demand soared.

“Delivery was one of the big growth levers,” he added. “Due to the change in the daily lives and needs of the customer, we adapted quickly and provided them with what they needed most. We partnered up with many stores, pharmacies and restaurants, in order to deliver essentials to citizens in Saudi Arabia during a difficult time.”

On Thursday Mueed Al Saeed, assisting vice president of Land Transport Regulation of the Public Transport Authority, said there were 16 companies including Careem licensed to operate ride-hailing services in the Kingdom.

He also said 300 million trips had been carried out during the past three years, and that there were 250,000 drivers actively working for these services.