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737 MAX

One of the world’s leading aviation analysts believes the market’s negative reaction to the news of nonconforming parts on the Boeing 737 MAX is unwarranted and that production should be back to normal in June.  

Boeing stock lost more than US$7bn in market cap Friday after the disclosure that Spirit had installed nonconforming fittings on the aft section of the 737 MAX fuselage, connecting the vertical fin, since 2019.

Bernstein said: “Although we still do not have all details, we believe 737 MAX production could be back to normal by June and aircraft from storage (likely less than 60 in total if one excludes Chinese aircraft), could flow through at a normal rate in a few months. It suggests that Boeing could still meet Bernstein’s delivery target of 475 737s for the year.

“We see the financial impact on Boeing as likely far less than some estimates we see reported, such as $US2 billion. Our model is unchanged as we await comments by Boeing next week as it reports Q1, said Bernstein.”

The parts problem relates to two suppliers of the fittings to Spirit for which Spirit must complete the assembly. That completion is where the problem is. The third supplier delivers the fitting assembled, so it is not an issue.

Bernstein said that the repair process should be straightforward, with little impact on new production, although there could be some bottlenecks around tooling and resources for completed aircraft.

It adds that “for aircraft in the field, this should be an airworthiness directive that can be done in normal maintenance. We expect the cost of inspection and repairs to fall on Spirit, although Boeing may need to have some flexibility on that process.”

“Although unquestionably negative, in our view, this should be a relatively minor issue for Boeing. We expect a slowdown in deliveries for the next two months, after a strong March. Basically, aircraft currently going through final assembly will need to be inspected and repaired, as will those aircraft in storage, said Bernstein.

The stored 737 MAX aircraft Bernstein said will require more work, as the fin will need to be removed. While the process should be straightforward, there could be some bottlenecks around tooling and short-term resources.

It said that it does not yet know how long inspection and repair will take but believes this is at most a matter of a few days per aircraft once it starts.

Bernstein said that media speculation that Boeing’s deliveries for the year could be cut by something on the order of 20 per cent is “far too high to us.”

The US regulator the FAA has confirmed that there is no safety of flight issue and because the fittings are accessible without opening up the aircraft, there should be a high degree of flexibility as to when the airworthiness directive, yet to be issued, would need to be implemented. It is likely that the work can be done in the normal course of maintenance processes.

source：irlineratings