Boeing raises 20-year forecast for China aircraft demand despite pandemic

 BEIJING/SYDNEY (Reuters) - Boeing Co on Thursday raised its rolling forecast for China's aircraft demand for the next 20 years, making the country a bright spot in the aviation market even as COVID-19 decimates global deliveries over the next few years.

Chinese airlines will need 8,600 new airplanes through 2039, 6.3% higher than Boeing's previous prediction of 8,090 planes last year. Those would be worth $1.4 trillion based on list prices, the U.S. planemaker said in a statement.

In October, Boeing cut its 20-year forecast for global airplane demand due to the COVID-19 pandemic.

"While COVID-19 has severely impacted every passenger market worldwide, China's fundamental growth drivers remain resilient and robust," said Richard Wynne, managing director, China Marketing, Boeing Commercial Airplanes.

"Not only has China's recovery from COVID-19 outpaced the rest of the world, but also continued government investments toward improving and expanding its transportation infrastructure, large regional traffic flows, and a flourishing domestic market mean this region of the world will thrive."

China's domestic aviation market has rebounded to pre-COVID levels but as international travel remains effectively shut down, Chinese airlines have been pushing back deliveries.

Boeing and its European rival, Airbus SE , have been jostling to increase market share in China, but they also face rising competition from state-owned planemaker Commercial Aircraft Corporation of China (COMAC).

COMAC has been steadily delivering its regional ARJ21 to customers throughout the pandemic and its narrowbody C919, which is still in flight testing phase, is expected to obtain an airworthiness certificate from China's aviation regulator next year.

The regulator has declined to lay out a timeline for the return of the grounded Boeing 737 MAX even though the United States is expected to approve its return to the skies as early as next week.

Boeing projected a need for 6,450 new single-aisle airplanes over the next 20 years, while China's widebody fleet will require 1,590 new planes, accounting for 18% of the total deliveries, which fell from a year ago due to anticipation of a slower recovery in global long-haul traffic.

 

Boeing planning to restart production of 737 MAX by May, says Report

Boeing Co plans to restart 737 MAX production by May, ending a months-long halt triggered by a safety ban on its best-selling jet after fatal crashes, people familiar with the matter said on Tuesday.

Boeing's planning hinges on the scale of disruptions from the fast spreading coronavirus, and U.S. regulators clearing the 737 MAX to return to service, a milestone Boeing still expects to reach in mid-2020.

One industry source said Boeing has asked some suppliers to be ready to ship 737 parts in April. Another person said production was planned to restart in May. A third person said coronavirus is throwing a wrench in Boeing's plans - they had initially hoped for April, but that fell to May.

"It'll be a very slow, methodical, systematic approach to warming the line up, and getting crews back in place," Boeing Chief Financial Officer Greg Smith told Reuters on Tuesday when asked about the May restart goal.

ALSO READ: Boeing to separate 737 MAX wire bundles before return to service: Report

"Priority number 1 is getting customers' fleets back up," Smith said, adding that a production ramp up will be paired with clearing the MAX backlog. "We don't want to add to inventory."

Boeing ceased production of the jet in January as it struggled to win regulatory approvals and accrued a backlog of 400 undelivered jets.

The coronavirus pandemic has shattered global travel demand, upended lives for millions and wiped billions off Boeing's market value, compounding a year-old crisis over the grounding of the 737 MAX after crashes in Ethiopia and Indonesia killed 346 people.

Boeing said on Monday that it would halt production in its Washington state facilities, beginning on Wednesday, to reduce coronavirus risks.

Boeing has reported dozens of cases across its Seattle-area facilities, many of which were at its Everett hub north of Seattle. One worker died from the coronavirus, according to a friend's Facebook tribute on Monday.

Boeing has told suppliers to halt shipments to its Seattle-area facilities, and has frozen hiring among other cash-saving measures.

Boeing is seeking $60 billion in U.S. government aid to prop up its finances and the embattled American aerospace supply chain.

Boeing has used the production lull to curb inefficiencies, improve quality and ease the plane's re-entry to the market.

Boeing gives recommendations to US FAA on 737 MAX wiring concerns: Report

Boeing Co has provided preliminary recommendations to the US FAA to address concerns over wiring bundles on its grounded 737 MAX jetliner, people familiar with the matter said on Friday.

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The US planemaker and the Federal Aviation Administration said last month they were reviewing a wiring issue that could potentially cause a short circuit on the grounded 737 MAX.

737 MAX's return delayed, Boeing says it won't fly again until mid-year

Boeing Co said on Tuesday it does not expect to win approval for the return of the 737 MAX to service until mid-year due to further potential developments in the certification process and regulatory scrutiny on its flight control system.

Boeing said it has informed airlines and suppliers of the new estimate, which is longer than previous forecasts and also takes into account new anticipated pilot training requirements.

Reuters reported last week that regulators had been pushing back the time needed to approve the plane, which was most recently expected to happen in February or March, a year after the jetliner was grounded worldwide.

Based on regulatory approval in the first quarter, the three US airlines that operate the 737 MAX - American Airlines Group Inc , United Airlines Holdings Inc and Southwest Airlines Co - were scheduling MAX flights in early June. They will now likely have to extend the timeline again. They have said it could take at least 30 days to resume flights following US Federal Aviation Administration approval because of the time needed to ready the planes and train pilots.

The Chicago-based planemaker has been updating the 737 MAX flight control system and software to address issues believed to have played a role in two crashes in Indonesia and Ethiopia that killed 346 people within five months.

Boeing shares closed 3.3 per cent lower at $313.37 (240 pounds) after falling as much as 5.7 per cent during the session.

"Returning the MAX safely to service is our number one priority, and we are confident that will happen," Boeing said in a statement. "We acknowledge and regret the continued difficulties that the grounding of the 737 MAX has presented to our customers, our regulators, our suppliers, and the flying public."

Boeing said it will provide additional information with quarterly results next week.

The FAA said in a statement on Tuesday that it is following a "thorough, deliberate process to verify that all proposed modifications to the Boeing 737 MAX meet the highest certification standards."

The agency is working with other safety regulators to review Boeing's work and reiterated it has set no time frame for when the review will be completed.

Reuters reported on Monday that Boeing is in talks with banks about borrowing $10 billion or more amid rising costs after the two crashes involving the 737 MAX.

Boeing in recent days temporarily halted production of the 737 MAX in Washington state, a move it announced in December as it became clear that regulatory approval was taking longer than it had forecast.

Boeing has estimated the costs of the 737 MAX grounding at more than $9 billion to date, and is expected to disclose significant additional costs during its fourth-quarter earnings release on Jan. 29.

The company faces rising costs from halting production of the plane this month, compensating airlines for lost flights and assisting its supply chain.

Following Boeing's announcement, Canada's WestJet Airlines said it would remove the 737 MAX from its schedule through June 24. Air Canada declined comment.

For turnaround veteran Calhoun, the task is cut out at beleaguered Boeing

Beleaguered Boeing Co is putting its future in the hands of a turnaround veteran who has led several companies in crisis, cut his teeth at engine maker General Electric Co and has spent a decade on the board of the world's largest planemaker.

Newly appointed Chief Executive David Calhoun, 62, was made Boeing's chairman two months ago in the midst of the crisis that has rocked the company since airliner disasters in Indonesia and Ethiopia led to the grounding of its best-selling 737 MAX.

This isn't his first taste of corporate upheaval.

Calhoun became chairman of the Caterpillar Inc board shortly after federal agents raided its headquarters in 2017, headed a General Electric unit that included jet engines after the Sept. 11, 2001 attacks, and turned round media research company Nielsen to go public. He has also been a longtime executive at Blackstone private equity group.

"Having seen him run GE's aviation business after 9/11, I know he can execute under pressure," former GE chief executive Jeff Immelt told Reuters by email when asked about Calhoun, adding that Calhoun would restore customer trust in Boeing.

As Calhoun tackles the MAX crisis, he also faces questions from European regulators over a deal to buy the commercial arm of Brazil's Embraer in a major strategic move.

Calhoun, who has co-written a book on business, "How Companies Win," says being candid is part of being a leader, an approach which many critics say was absent from Boeing's initially guarded approach to concerns about the 737 MAX.

"The second you get into the office til the second you leave, every interaction is judged," he said in a video published in 2014 by the Jack Welch Management Institute.

"You try to hide anything from everybody and I think your body language becomes perfectly apparent." Yet in his short time as Boeing chairman, Calhoun has showed his ability to force changes behind the scenes, as seen by his role in the departure of Kevin McAllister as chief executive of Boeing's planemaking arm in October. The removal was silent and swift, foreshadowing Dennis Muilenburg's ouster this week.

Some insiders saw McAllister - another GE veteran - as a scapegoat for the MAX crisis. Others say he paid the price for distractions including widely publicized cracks in the company's older 737NG jets, which caught the board off guard. The 737 MAX was not impacted by the cracking issue.

The reckoning came at an informal board dinner in Texas led by Calhoun in late October. As directors wound up a two-day summit a day later, Calhoun and Muilenburg took McAllister aside and told him he was out, two people briefed on the meeting said.

In a sign that the board was already claiming a new voice under recently appointed chairman Calhoun, having split the CEO and chairman roles, the decisive dinner conversation that led to the shake-up took place without Muilenburg, the people said.

Boeing declined comment on confidential board discussions.

McAllister and Muilenburg could not be reached.

Pressure for change

Now, Calhoun must repair frayed relations with regulators, continue to manage a cash squeeze from the crisis and bring to market the new 777X jet at a time of tough regulatory scrutiny.

His experience on the Boeing board will allow Calhoun to "take the reins in short order without the need for a longer period of familiarization," said Timm Schulze-Melander, industrials specialist at European research house Redburn.

As a long-time board member who learned the industry at GE, Calhoun shares the qualities of both an insider and outsider - worrying some who question whether he is the fresh blood Boeing needs to overhaul what often seems a smug corporate culture.

"Boeing needs a revamp of its corporate governance. The board should be fired," said Paul Njoroge, a Toronto-based investment professional who lost his family in the Ethiopia crash.

"I don't think (Calhoun) is going to change the culture of Boeing," he added.

A former Nielsen executive called Calhoun a "hard-nosed" leader who does not warm to dissent, but who can inspire.

"(Boeing) might need someone as tough as Dave. I don't think he would be a good manager over a long period of time. As a crisis manager, he might be able to get it done," the person said.

Even though Calhoun sat on Boeing's board throughout the development of the MAX, some argue he has the tenacity to drive through reform.

"It is hard to bring in somebody who doesn't know aviation or have credibility with airlines," said Lundquist Group managing director Jerrold Lundquist, a consultant who first met Calhoun in the 1990s and who believes he is what stricken Boeing needs.

"It is tough to come in cold. To some degree that is a trade-off they have to make," Lundquist said.

Boeing pilot who flagged flaws in 737 MAX simulator transferred to new job

One of two Boeing Co technical pilots who described flaws in a crucial flight control system in leaked 2016 instant messages has been transferred to a new job at the U.S. planemaker, two people familiar with the matter said on Tuesday.

Boeing shares tumbled after the conversation between the employee, Patrik Gustavsson, and then-chief technical pilot Mark Forkner became public on Oct. 18.

The comments by Forkner, who has since left Boeing, were among those pinpointed by U.S. lawmakers in hearings in Washington as evidence Boeing knew about problems with flight control software well before two crashes of its 737 MAX aircraft in October 2018 and March 2019 killed 346 people. [L2N27E0HE]

Gustavsson was a technical pilot for the 737 program at the time Forkner told him the jetliner's so-called MCAS stall-prevention system was "running rampant" in a flight simulator. Gustavsson later replied that other pilots had kept them "out of the loop" on changes to MCAS.

Gustavsson has been transferred in the last two weeks to Boeing's Test & Evaluation group, a source familiar with the matter said. A second source confirmed that he was recently moved to a new job but had no details.

The Test & Evaluation group includes pilots who put the actual 737 MAX aircraft through hundreds of hours of test flights before the jetliner entered service.

If Gustavsson was made a test pilot in the group, he would have likely received a 15%-20% raise, the first source said.

It was unclear why he changed jobs.

A Boeing spokesman declined to comment.

Before the change, Gustavsson was a 737 technical pilot for roughly 5 years, according to his LinkedIn profile. He was named 737 Chief Technical Pilot in 2018, his profile says.

Gustavsson and Forkner were part of a team that worked on the flight manuals airlines have used since the 737 MAX entered service in 2017, and fielded operations and systems questions from dozens of global airlines operating thousands of 737 aircraft globally, former employees told Reuters in late October.

Forkner also worked to identify and fix glitches on the 737 MAX simulator. He left Boeing in 2018 and is now a First Officer at Southwest Airlines , according to his LinkedIn profile.

Before Boeing, Gustavsson spent 11 years in various roles such as simulator instructor at Ryanair Holdings PLC , according to his LinkedIn profile.

Separately, Boeing said on Tuesday that Conrad Chun was named vice president of communications for its commercial airplanes division, taking over from Linda Mills, who is leaving the company.

Boeing axes 210 orders after Jet Airways crisis, loses lead over Airbus

Boeing Co removed 210 aircraft from its order backlog and took an impairment charge over customer financing losses on Wednesday following the near-collapse of India's Jet Airways.

The adjustment pushed the world's largest planemaker behind European rival Airbus in the race for business this year as both companies grappled with cancellations that outweighed new orders in the first quarter.

Under recent changes in accounting rules, Boeing hives off orders that no longer meet its criteria for recognising revenue into a separate category, while defending contractual claims.

As a result, Boeing net orders for the first quarter slid into negative territory, with a total of minus 119 net orders after cancellations, despite a slew of new wide-body sales.

Airbus posted a negative total of 58 net orders over the same period.

Boeing finance director Greg Smith confirmed the adjustment was related to financial problems at Jet Airways, which halted all flight operations indefinitely on April 17 after its lenders rejected a plea for emergency funds.

Reuters reported earlier on Wednesday that Boeing's order adjustment, which initially emerged on a routine web page for orders and deliveries, came after Jet Airways stopped flying.

Boeing also posted a first-quarter operational loss of $707 million in a specific category grouping together certain unallocated items, compared with a loss of $326 million a year earlier. Overall, it posted a $2.35 billion operating profit.

"The change in earnings from other unallocated items and eliminations is primarily due to a customer financing impairment, higher deferred compensation expense and increased enterprise research and development investment," Boeing said.

Industry sources say customer finance arm Boeing Capital is carrying 75 narrow-body orders on behalf of Jet in addition to 125 that the airline ordered directly from Boeing Commercial Airplanes.

There have also been doubts over a 10-year-old order of 10 wide-body 787s. At least one of Jet's 787s has already been built, according to recent visitors to Boeing factories