The airline plans to preserve cash by cutting the output by 19 percent, which brings its production to 42 airplanes in a month.
Boeing has taken a hit after the global grounding of 737 Max planes. It happened after two recent deadly crashes in Ethiopia and Indonesia that killed 346 people combined within five months of each other. To limit the financial impact of these groundings, the company is cutting the production of the Boeing 737 jetliner, Bloomberg reported.
The airline plans to preserve cash by cutting the output by 19 percent, which brings its production to 42 airplanes in a month. Boeing's Chief Executive Officer Dennis Muilenburg announced this plan on April 5 as the company was trying to assuage the distrust of the public towards Max 737.
"Boeing 737 rate-cut to 42 a month from 52 starting in mid-April tells us the company thinks it will take longer than expected for regulators to end the grounding of the Max 737," Muilenburg said. "Safety is our responsibility and we own it."
The airplane maker had plans to ramp up the production of 737 by about 10 percent by mid-year before the Lion Air and Ethiopian Airlines crash. The change in plans hit the suppliers who had already hired workers and invested in capacity expansion. They had also started orchestrating a schedule to increase production.
Two main suppliers of Boeing, CFM International and Spirit AeroSystems Holdings Inc, indicated that they would continue their operations at record pace regardless of Boeing's plans.
A CFM spokesperson said that maintaining their usual operation would help ensure "the stability of the global CFM supply chain". Spirit AeroSystems plans to store the fuselages and other factors it made for 737 in its factories.
Boeing is staring at further slashing in the production of its models if the grounding is not lifted. If the regulators do not give their green light soon, the airplane maker will have to store hundreds of its fresh models in the US.
Last week, Ethiopian officials released a preliminary report on the latest accident involving Max in March, confirming that the cause for it was the same as the Lion Air crash in October 2018.The directors of the company have been asked to review policies and processes for design and development of planes. They aim to study the safety of the 737 Max and recommend more improvements to the planes.Subscribe to Moneycontrol Pro and gain access to curated markets data, trading recommendations, equity analysis, investment ideas, insights from market gurus and much more. Get Moneycontrol PRO for 1 year at price of 3 months at 289. Use code FREEDOM.