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Boeing 737 MAX Cleared to Fly Again, but Covid-19 Has Sapped Demand

The U.S. on Wednesday approved Boeing Co. BA 3.78% ’s 737 MAX jets for passenger flights again after dual crashes took 346 lives, helping to resolve the plane maker’s biggest pre-pandemic crisis.


The Federal Aviation Administration’s official order to release the MAX, grounded since March 2019, comes as the beleaguered Chicago aerospace giant grapples with a host of new problems amid the continuing health crisis.


The FAA’s order for ungrounding allows Boeing to resume delivering the jets to airlines and let them carry passengers. But the pandemic has sapped demand for air travel, prompting airlines and aircraft-leasing firms to cancel about 10% of Boeing’s outstanding MAX ordersthis year. Boeing has said it believes hundreds more of its remaining 4,102 orders could be in jeopardy.

With Boeing’s problem shifting from an inability to meet demand to an oversupply, the MAX crisis has become a double whammy. The manufacturer has estimated the debacle had cost it about $20 billion, which includes financial hits related to halting production earlier this year. Engineering mistakes and management lapses provoked a tangle of civil litigation, a criminal investigation and congressional scrutiny.


Boeing declined to comment before the FAA issues its ungrounding order. The company has previously said it was working to regain the trust of its customers, regulators and the flying public and was dedicated to preventing similar accidents.


Accident investigators have said misfires of an automated flight-control system, called MCAS, led to the crashes of Indonesia’s Lion Air in October 2018 and Ethiopian Airlines in March 2019, when regulators grounded the MAX world-wide. Boeing has spent the past two years hammering out fixes to the system, revising pilot training and making related changes while responding to demands from world regulators.


Meanwhile, the plane maker has said it is working to restore credibility with the public. In planning for the MAX’s return, airlines have said they considered potential passenger reaction, conducting their own surveys and laying out plans to rebook any nervous travelers on different aircraft.


The MAX debacle prompted consternation among some of the company’s biggest customers, sparked a boardroom and management shake-up inside Boeing and pushed the plane maker to revamp internal engineering and safety-reporting procedures.


This year, Boeing customers have either walked away from jets whose delivery has been delayed more than a year, as their contracts typically allow them to do without penalty, or put off taking the aircraft to future years when, according to industry predictions, air travel recovers toward pre-pandemic levels.


Airlines around the world have been struggling financially throughout the pandemic, in many cases putting the brakes on long-planned airplane purchases as they lay off thousands of employees, save cash and restructure debts. Some have stopped flying altogether, further expanding the glut of planes.


Executives at Boeing have said they expect to deliver about half of its inventory of about 450 built MAXs by the end of next year, and the majority of those remaining the following year.

While some of the finished planes may need new buyers, the executives have suggested many of the aircraft will likely wind up at their originally intended operators, who have deferred deliveries to 2022 or later.


How quickly Boeing can move its finished MAX jets will determine how many new aircraft it will eventually make. That production rate will have implications for how many workers it needs and the ability to generate cash in coming years.


“We’re determined not to create a bigger problem than we started with, and so that production rate will stay low until the movement of those airplanes,” Boeing Chief Executive David Calhoun told analysts in late October.


Mr. Calhoun predicted a Covid-19 vaccine—if, as U.S. health officials suggest, it is available widely by the middle of next year—could help turn around Boeing’s crises, leading to a “run on the bank” for narrow-body airplanes. “It’s going to be the response when the recovery really does come,” he said last month. News of another promising vaccine trial has boosted aviation stocks. Boeing’s shares are up about 12% this week to $210.05 as of Tuesday.


The accidents will have long-term fallout. They have led to changes in airplane-design principles and created friction between U.S. and international aviation regulators. Once the MAX fleet returns to service, Canadian and European regulators are expected to follow through with demands to incorporate additional safeguards on both existing and future versions.


Not only has the MAX’s protracted grounding allowed its European rival, Airbus SE, to encroach on its market share for single-aisle jets, but the pandemic has forced Boeing to cut back on production of its wide-body jets such as the 787 Dreamliner as well. The sudden drought in business has prompted the company to consolidate factories and take steps to cut about 30,000 jobs.


Once the formal FAA orders are published Wednesday, Boeing, the FAA and airlines still have to complete a host of technical and logistical tasks to bring back jets stored for nearly two years.


Maintenance work and operational test flights are the responsibility of individual carriers. U.S. and European air-safety officials already have issued a series of warnings to airlines, alerting them about the hazards of possible fuel contamination and sensors obstructed by debris that could cause accidents.


Airline officials have said it would take a month or two to put thousands of their pilots through additional mandatory training, including a roughly two-hour session in flight simulators that aims to roughly replicate the accident scenarios.


MAX jets aren’t expected to be in widespread use in the U.S. until 2021, government and airline officials have said, partly because carriers indicated they plan to phase them gradually into schedules. It is likely to take foreign regulators and airlines weeks or months longer, according to these officials.


This article originally appeared on the Wall Street Journal

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