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As it continues to wrestle with the aftermath of two catastrophic 737 Max crashes within five months – Lion Air Flight 610 in late October 2018 and Ethiopian Airlines Flight 302 in early March 2019 – Boeing is keenly aware of the importance of its supply chain to a timely resumption of production and deliveries.
Over the century it has been sourcing parts, components and services with a constellation of suppliers, including more than 600 of various sizes currently scattered across Canada, it has become more than “the sum of its parts.”
It’s an industrial symbiosis in which the suppliers depend on Boeing for their existence and, in turn, Boeing needs their efficiencies and economies of scale to keep turning out ever-evolving aircraft to serve a growing global market.
It’s something David Calhoun, the new president and chief executive officer of Boeing, was keenly aware of when, at less than three weeks on the job, he had to preside over a Jan. 29 “earnings” call with market analysts and media about Boeing’s 2019 financial report. The call confirmed a full-year net loss of US$636 million after record earnings of US$10.46 billion in 2018. It was Boeing’s first loss in more than two decades.
Those two crashes, attributed to a flight software conflict, saw the eventual grounding of the global Max fleet in March 2019 except for some crew-only deliveries to service centres.
However, Boeing continued to build the Max in the hope of dealing with a multi-year order backlog, but eventually had to suspend production when it found itself with an inventory of some 400 grounded aircraft to manage.
Calhoun said it will take about 18 months to complete and deliver all of them once regulators clear the Max to fly again, which could come by mid-year. “Folks want the airplane,” he said.
The financial outlook is also clouded by issues with other aircraft programs. Boeing also revealed in its January earnings call that it will slow monthly production of its 787 Dreamliner to 10 by early 2021, down from the current 14 produced each month.
Then, there’s the uncertain market for its new 777X, which had its first flight in late January and which Calhoun described as “a proof point of Boeing’s engineering and technology prowess.” First delivery is expected in 2021.
Following its decision to suspend 737 Max production in January, Boeing Commercial Airplanes (BCA) instructed suppliers to suspend shipments for a month. BCA’s Seattle-based spokesman, Paul Bergman, told Skies that it also set out scenarios for managing their production.
“The scenarios show some possible supplier delivery rate options that are under consideration, and are not specific commitments,” said Bergman, adding that supplier input would help BCA’s overall planning.
He acknowledged that this posed “challenges for some suppliers,” but he reiterated Calhoun’s commitment to working with them “to manage risks, address hardships and ensure their ability to support seamless production resumption …
Some suppliers have laid off workers, including Wichita, Kan.-based Spirit Aerosystems, which makes fuselages for the Max program and has laid off close to about 2,800 people. Other companies have shuffled workers to other programs or assigned them different tasks in the hopes of retaining their skilled labour force until the Max program is reinstated.
Bergman said Boeing remains committed to its supply chain.
“Our objective is unchanged: a healthy and stable 737 production system.”