Aerospace suppliers prepare for prolonged grounding of 737 MAX

By Ankit Ajmera

DUBAI (Reuters) – Makers of aircraft parts are making contingency plans for a prolonged grounding of Boeing’s 737 MAX, with several expecting the jet’s return to service to take longer than the planemaker hopes.

The start date of deliveries of the MAX, grounded worldwide in March following a second fatal crash in five months, and the pace of production, which affects prices of aircraft parts, were key topics of discussion among suppliers at the Dubai Airshow this week.

Boeing (NYSE:) has said it hopes to begin deliveries of the jet next month after a software fix is approved by the U.S. Federal Aviation Administration, with pilot training requirements likely getting a nod in January. The FAA has said it has no timetable.

“Every three months (Boeing) have been kicking that can down the road, for nearly a year,” said an executive with a maker of parts for cabin interiors.

He and others attending the show declined to be named for fear of antagonizing Boeing or other manufacturers, whose programmes dominate many suppliers’ annual turnover.

Boeing did not immediately respond to a request for comment.

U.S. airlines including Southwest Airlines (N:), American Airlines (O:) and United Airlines (N:) have extended cancellations of Boeing 737 MAX flights until early March.

Ryanair said February or the start of March is the most realistic timetable for it to start flying the grounded aircraft.

“Some airlines are telling us that the airplane won’t be back before next summer,” said the cabin supplier, adding that he had re-allocated some production capacity to Airbus parts.

Boeing cut production of the airplane in April, to 42 a month from 52. Before the grounding, it had been expected to rise to 57 a month this year, a target Boeing has said it is still aiming to hit by the end of 2020.

Suppliers were already facing pressure on prices from both Boeing and Airbus while trying to keep up with record demand for production, which often requires extra investment. Many rely on boosting volumes to drive down unit costs.

Investing is the only way to overcome challenges for sub-contractors, one supplier of electronic equipment for Boeing and Airbus said, but it has slowed this year due to the grounding of the MAX.

Even though Boeing has cut production at its own plants, it has kept part of its global supply chain running at the previous rate so it can ramp up quickly after the MAX returns to service.

But one supplier of a part that goes into the MAX said he had halted production and was replacing lost sales by focusing on replacements for older models, based on the possibility that the grounding could last beyond March.

“If you look back at what happened for the last nine months, I don’t think Boeing gained points in terms of trust,” he said. “Their communication is probably not the best.”

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