BOEING CRISIS AFFECTS THE U.S. ECONOMY

Kevin Eagan - Apr 15, 2019
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The international suspension of the 737 Max has affected Boeing's finances and has also begun to impact the U.S. economy. The Boeing crisis was unleashed after the Ethiopian Airlines Boeing crashed. As a result, a tenth and a half of GDP growth of the U.S. economy has been endangered, according to estimates of the largest US bank, JP Morgan.

This disproportionate impact of the Boeing crisis is caused by the influence of the aerospace industry on the U.S. foreign trade statistics. Since most of the production of the 737 was going to be destined to the international market, the paralysis of the sales supposes fewer exports and, therefore, smaller growth.

Currently, it is not known when the company will be able to fly the 400 planes of the 737 Max category. Boeing announced that the updates of the controversial MCAS software will be delayed. When it is launched, the Federal Aviation Administration (FAA) and various air regulators have to approve the changes, which will be followed by a trial and a training period by pilots and airlines.

Also, last week, Boeing announced that it would reduce Max's manufacturing from 52 to 42 a month. It is the first time that the largest aircraft manufacturer in the world cut its production of a model since the halting of the aviation industry caused 18 and a half years ago by the attacks of 9/11.

Boeing's decision had a cascading effect on the aeronautical sector. Since the component suppliers operate with a lapse of time between 12 and 18 months behind the manufacturers, there is the obvious danger of creating a bottleneck of aircraft stored by Boeing and parts, engines, and other equipment by the company. That translated into widespread downturns in the Wall Street aerospace sector that also extended to the low-cost carrier Southwest Airlines, whose fleet is almost exclusively composed of 737 aircraft and which had planned to replace at least 20 of them this year with the Max.

According to JP Morgan, 35% of Boeing's cash flow was going to come from the Max this year. Now, with the prospect that the plane will not be sold for months, plus the storage costs of those that continue to be manufactured, and the more than probable demands of airlines for compensation for the 375 aircraft that cannot fly - more than 100 million euros per unit - Boeing faces a significant impact on its accounts.

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Comments

  1. -American Airlines cancels Boeing 737 Max flights till mid-August (will affect about 115 flights a day)
    -Southwest Airlines last week canceled flights by August 5, 2019, so far.

    Mike (USA)
  2. Two months after the crash of Ethiopian Airlines and the flight ban that has hit all B737 MAX worldwide, Boeing estimates that the total cost for airline customers could exceed one billion dollars. Southwest Airlines, the most equipped company in B737 MAX with 34 aircraft, alone puts forward a loss of $ 150 million for the first quarter of 2019.

    Martin Heger (United Kingdom)
  3. According to the latest Boing report published on the Ma 14y, the company received no new aircraft orders during the Apri 2019l.

    Nik Pulm (Israel)
  4. Boeing to pay $4.9 billion to airlines for grounding the 737 Max

    Wiser (Austria)
  5. Boeing has recorded a net loss of 793 million dollars (711 million euros) in the first half of the year as a result of the paralysis of the 737 MAX model after two fatal accidents in less than six months.

    Vasil (Armenia)

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