Business

Stakes rise for Boeing as EU and Canada up scrutiny of 737 Max after crashes

Reuters, Bloomberg

Europe and Canada said they would seek their own guarantees over the safety of Boeing’s 737 Max, further complicating plans to get the aircraft flying worldwide after they were grounded in the wake of two accidents killing more than 300 people.

As the U.S. Federal Aviation Administration (FAA) analyzes Boeing’s plans for a software fix prompted by the first crash five months ago, the European Union’s aviation safety agency EASA promised its own deep look at any design improvements.

“We will not allow the aircraft to fly if we have not found acceptable answers to all our questions,” EASA Executive Director Patrick Ky told an EU parliament committee hearing.

Canada said it would independently certify the 737 Max in the future, rather than accepting FAA validation, and would conduct an “exhaustive review” of the automated flight control system in Max aircraft, known as MCAS, which experts believe may have played a role in both crashes.

Canada also said it would send a team to help U.S. authorities evaluate proposed design changes and decide if others were needed.

Boeing Co. declined to comment. The company on Tuesday reshuffled the top executives in its commercial airplanes unit to focus on the accident investigations.

U.S. government officials do not believe the two crashes will lead to a worldwide shift away from FAA certifications but U.S. lawmakers, as well as federal prosecutors, are scrutinizing the certification of the Boeing 737 Max.

The chairman of the U.S. House of Representatives transportation committee and another key Democrat asked the Transportation Department’s inspector general on Tuesday to examine key decisions made by the FAA in certifying the 737 Max jet for use.

The FAA declined to comment on that request or on actions taken by other countries, but said in a statement that “the current, historic aviation safety record in the U.S. and globally is achieved through the FAA’s robust processes and full collaboration with the aviation community.”

The U.S. Transportation Department’s inspector general plans to audit the FAA’s certification of the jet, an official with the office said on Tuesday. The office can recommend changes or improvements to how the FAA operates. Boeing said it would cooperate with the audit.

Unusual intervention

The unusual public intervention by two leading regulators came as a probe into the final minutes of Ethiopian Airlines Flight 302 turned toward secrets hidden in the cockpit voice recorder.

The voices of Captain Yared Getachew and First Officer Ahmednur Mohammed could help explain the March 10 crash of the Boeing 737 Max that has worrying parallels with another disaster involving the same model off Indonesia in October.

The twin disasters killed 346 people, but there is no conclusive evidence so far that they are linked.

Black box data was downloaded in France but only Ethiopian experts leading the probe have access to the dialogue between Getachew, 29, and Mohammed, 25. The data was back in Addis Ababa on Tuesday, sources familiar with the probe said.

Experts believe the new MCAS system, which is designed to stop stalling by dipping the nose, may have been a factor in both crashes, with pilots unable to override it as their jets plunged downward.

Both came down just minutes after take-off after erratic flight patterns and loss of control reported by the pilots. However, every accident is a unique chain of human and technical factors, experts say.

The prestige of Ethiopian Airlines, one of Africa’s most successful companies, and Boeing, the world’s biggest plane-maker and a massive U.S. exporter, are at stake.

Awkward questions

Lawmakers and safety experts are questioning how thoroughly regulators vetted the Max model and how well pilots were trained on new features. For now, global regulators have grounded the existing fleet of more than 300 Max aircraft, and deliveries of nearly 5,000 more — worth well over $500 billion — are on hold.

Pressure on Chicago-headquartered Boeing has grown with news that federal prosecutors are scrutinizing how carefully the Max model was developed, two people briefed on the matter said.

The U.S. Justice Department is also looking at the FAA’s oversight of Boeing, one of the people said. And a federal grand jury last week issued at least one subpoena to an entity involved in the plane’s development.

U.S. President Donald Trump plans to nominate former Delta Air Lines executive Steve Dickson to head the FAA on Tuesday. The agency has been without a permanent head for 14 months.

In the hope of getting its Max line back into the air soon, Boeing has said it will roll out a software update and revise pilot training. In the case of the Lion Air crash in Indonesia, it has raised questions about whether crew used the correct procedures.

Development of the 737 Max, which offers cost savings of about 15 percent on fuel, began in 2011 after the successful launch by its main rival of the Airbus A320neo. The 737 Max entered service in 2017 after six years of preparation.

Argus Research cut Boeing stock to “hold” from “buy,” giving the plane-maker at least its fourth downgrade since the crash, Refinitiv data showed. Its shares rose 0.3 percent on Tuesday, to close at $373.43. They are still down more than 11 percent since the crash in Ethiopia, with the company’s market value having tumbled by about $28 billion.

Global ramifications

Various firms are reconsidering Boeing orders, and some are revising financial forecasts given they now cannot count on maintenance and fuel savings factored in from the Max.

Air Canada said it intended to keep its Max aircraft grounded until at least July 1, would accelerate intake of recently acquired Airbus A321 planes, and had hired other carriers to provide extra capacity meantime.

Beyond the corporate ramifications, anguished relatives are still waiting to find out what happened.

Many have visited the crash site in a charred field to seek some closure, but there is anger at the slow pace of information and all they have been given for funerals is earth.

“I’m just so terribly sad. I had to leave here without the body of my dead brother,” said Abdulmajid Shariff, a Yemeni relative who headed home disappointed on Tuesday.

Trade deal impact

China is looking at excluding Boeing Co.’s troubled 737 Max jet from a list of American exports it would buy as part of a trade deal with the U.S., people familiar with the matter said.

Boeing jets were featured on a draft list of American products China would buy to reduce its trade surplus with the U.S., the people said, asking not to be identified discussing private deliberations. Now, safety concerns are pushing China to examine whether to cut the 737 Max from the list altogether or replace it with other Boeing models after the crash of a plane operated by Ethiopian Airlines led to the aircraft being grounded worldwide, they said.

A reduction in aircraft purchases could make it harder for China to fulfill an offer it’s said to have made to pare its $300-billion-plus annual goods trade surplus with the U.S. over six years, and potentially delay any overall agreement between the two countries. Worth billions of dollars and a key U.S. export, planes would likely be a key component of any commitment by China to buy more American goods, along with soybeans, meat and natural gas.

China’s Ministry of Commerce, which is in charge of the nation’s trade talks with the U.S., referred queries to the nation’s top economic planning body, which didn’t immediately respond to a request for comment. A Boeing representative declined to comment.

For Boeing, China’s exclusion of Max purchases in a trade deal would mark another setback for a company that’s reeling from a crisis of confidence over its top-selling plane, which accounts for almost a third of its operating profit.

Chinese airlines made up about 20 percent of 737 Max deliveries worldwide through January, according to Boeing’s website. China Southern Airlines Co. has 16 of the aircraft, with another 34 on order. China Eastern Airlines Corp. has 13, while Air China Ltd. has 14, according to Boeing. Other Chinese airlines that have bought the Max include Hainan Airlines Holdings Co. and Shandong Airlines Co.

The 737, which first entered service in the late 1960s, is the aviation industry’s best-selling model and Boeing’s top earner. The re-engineered Max version has racked up more than 5,000 orders worth in excess of $600 billion, including planes that have already been delivered.

The model duels with rival Airbus SE’s A320neo family in a global, head-to-head competition for sales. While the European plane-maker is increasing narrow-body output at its plant in Tianjin and elsewhere, the 737 Max’s grounding has no bearing on Airbus demand, Chief Commercial Officer Christian Scherer said Tuesday at an event in Taipei.

Most of China’s airlines count the government as its top shareholder and aircraft purchases are often coordinated by state agencies including the Civil Aviation Administration of China and National Development and Reform Commission. No other country has more demand for aircraft than China, which is estimated to seek 7,690 new planes worth $1.2 trillion in the 20 years through 2037, according to Boeing’s latest forecast.

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