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Boeing Restarts 737 Max Assembly Line

By Lou Whiteman – May 28, 2020 at 9:20AM

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The company hopes to have the plane flying again in the third quarter.

Boeing (BA 4.65%) said late Wednesday that it has restarted 737 Max production, meeting its self-imposed May 31 deadline to resume building its troubled airplane.

The 737 Max has been grounded since March 2019 after a pair of fatal crashes, and Boeing halted production in January after stockpiling a large number of finished, but undeliverable, aircraft. Boeing has missed several internal deadlines to return the plane to the air, but even with delays caused by the COVID-19 pandemic, company officials are confident the plane will be recertified to fly in the second half of 2020.

A Boeing 737 Max on a tug.

Image source: Boeing.

The company in a statement said it intends to begin building the airplanes at a low rate, gradually ramping up production as the year goes on.

"We've been on a continuous journey to evolve our production system and make it even stronger," Walt Odisho, Boeing vice president and general manager of the 737 program, said in a statement. "These initiatives are the next step in creating the optimal build environment for the 737 MAX."

When it was introduced, the Max was expected to be one of the top-selling planes of all time, but the environment has changed significantly in the months since it was grounded. The pandemic has caused airlines that just a few months ago were looking to expand to instead focus on survival, putting Boeing's massive order book in doubt.

Boeing lists a backlog of more than 4,000 737 orders, but until airline economics improve, expect some of those orders to be deferred or cancelled.

In April, one of Boeing's largest customers, Airplane leasing giant Avolon, cancelled orders for 75 737 Max planes. And Southwest Airlines, which operates an all-737 fleet and is one of the biggest customers of the new plane, earlier this year reached a deal with Boeing to defer 59 of the 107 Max planes it was expected to take delivery on through 2021.

Even if demand is weak, getting the 737 Max flying would be a huge milestone for Boeing. The company burned through $4.7 billion in the first quarter and will continue to bleed cash until 737 Max deliveries resume.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends Southwest Airlines. The Motley Fool has a disclosure policy.

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