April 5, 2019 / 4:09 PM / 2 months ago

Boeing cutting 737 MAX production in wake of two deadly crashes

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By Tracy Rucinski and Eric M. Johnson

CHICAGO/SEATTLE, April 5 (Reuters) - Boeing Co plans to cut its monthly 737 aircraft production by nearly 20 percent as it works to manage the grounding of its MAX aircraft in the wake of two deadly crashes, Chief Executive Officer Dennis Muilenburg said on Friday.

Deliveries of Boeing's best-selling aircraft were frozen after a global grounding of the narrowbody model following the crash of an Ethiopian Airlines jet on March 10.

Starting mid-April, production will be cut to 42 airplanes per month from 52, the company said in a statement.

Muilenburg said the company now knows that a chain of events caused a Lion Air crash in Indonesia last October and the Ethiopia disaster, with erroneous activation of so-called MCAS anti-stall software "a common link" between the two.

Boeing said it continues to make progress on a 737 MAX software update to prevent "accidents like these from ever happening again," he said.

Boeing had been planning to speed up production again in June to 57 a month.

Shares in Boeing Co fell around one percent after the market closed on Friday.

The 737 MAX is banned from flying in most countries across the world following the Ethiopia crash that killed all 157 people on board.

Boeing faces logistical issues in finding places to park the growing number of grounded 737 MAX planes as well as being responsible for all their maintenance costs since it has been unable to deliver the jets to customers, two people briefed on the situation said.

Manufacturers avoid halting and then resuming production as this disrupts supply chains and can cause industrial snags.

One source said it would take up to 6 months to re-start production of such a complex supply chain once it had been stopped, but cautioned a complete halt was unlikely.

Having to hold planes in storage without delivering them does, however, consume extra cash through increased inventory.

Separately, National Transportation Safety Board (NTSB) chairman Robert Sumwalt told reporters that U.S. investigators were given the raw data from Ethiopian Airlines Flight 302 as soon as it was read in France last month. The NTSB has a transcript of the cockpit voice recorder as well and provided assistance in transcribing the recorder, Sumwalt said.

He said the Ethiopian Airlines 302 preliminary report "was very thorough and well done."

Former NTSB chairman Christopher Hart, who was named by the Federal Aviation Administration this week to head an international team to review the safety of the Boeing 737 MAX, told reporters Friday he thought the review, which will start Monday, could take about three months. It is still not clear what countries will take part.

He said investigators are going to be focused far more on the interaction between software and pilots rather than mechanical issues in future. "This is territory we are going to see more of," Hart said.

Reporting by Tracy Rucinski in CHICAGO, Eric M. Johnson in SEATTLE, Tim Hepher in PARIS and David Shepardson in WASHINGTON; Editing by Chris Sanders and Grant McCool

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