As a follow-on to our prior April 3 update, Supply Chain Matters provides added highlights along with industry supply chain and product management perspectives relative to the ongoing global-wide grounding of the Boeing 787 MAX aircraft. Boeing 737 MAX 8

In our prior update, we had highlighted that after preliminary readouts of the Black Box data related to the Ethiopian Airlines tragedy, that investigators believed that the pilots of the ill-fated 737 MAX aircraft apparently followed established emergency procedures related to the suspect MCAS system, but unfortunately, failed to recover the aircraft. Boeing had unveiled a software patch, that addressed changes in the aircraft’s flight controls, modification of the operation of the aircraft’s automated Maneuvering Characteristics Augmentation System (MCAS) system, and a means for pilots to gain additional training on interactions with the anti-stall software system. With the proposed software patch, the MCAS system would rely on the readings of two ‘angle of attack’ sensors as opposed to one in the original design.

 

Added Developments

Shortly after our last update and based on the preliminary data from the Ethiopian Airlines accident, U.S. Federal aviation regulators ordered Boeing to address a second problem with the aircraft’s flight control system, separate from the suspected MCAS system. That problem was associated to the software controlling aircraft flaps and other flight-control hardware.

Since that time, Boeing engineers have addressed the additional software changes, and have conducted a series of test flights to recreate various MCAS scenarios and insure that the changes are adequate. The manufacturer has additional invited representatives from various affected air safety regulators and global air carriers to observe testing video and comment on the changes. Reports have indicated that thus far, global feedback has been positive.

What is becoming more apparent at this point is that Boeing is preparing for a prolonged effort to insure global air safety regulators and internationally based flyers that the aircraft is safe to fly after these changes. The campaign reportedly involves a series of simulator demonstrations across multiple global based training sites. Also, in back and forth discussions, is whether 737 MAX pilots will be required to undertake simulator training or rely on added enhanced training materials provided by Boeing.

The Wall Street Journal has recently reported that the U.S. FAA has formed an international panel of air safety regulators which is expected to jointly asses the aircraft’s eventual safety certification. Thus, the process has shifted toward an independent based appraisal of the aircraft’s return to service. The overall review process is expected to take 90 days. The report notes that this move would have been unthinkable months ago, but now highlights how much U.S. air safety leadership has been damaged following the two tragic accidents.

Various U.S. based airlines operating the 737 MAX, specifically American and Southwest Airlines, have elected to extend their cancellations of aircraft specific flights thru August of this year. U.S. carrier United Airlines currently anticipates grounding to continue thru July and told investors that it expects deliveries of new aircraft to resume by year-end.

While all of these actions occurring, lawsuits and financial compensation demand remain ongoing. Some Boeing shareholders are suing for alleged securities fraud violations, and according to the complaint, Boeing rushed the aircraft to market and “effectively put profitability and growth ahead of airplane safety and honesty,”  a serious allegation.  There all also new calls to split executive leadership of the company to including both a Chairman and CEO.

 

What Could be Next

Once again, Boeing’s and FAA decisions to take additional time in designed fixes, and in addressing international review and consensus are wise.

For Boeing’s supply network partners, industry-wide suppliers and Boeing’s internal 737 manufacturing teams, the scenario is indeed reflecting a longer supply chain disruption, and with that, the operational and financial implications.

From our Supply Matters lens, the likely scenario points to resumption of customer deliveries sometime in the Q4 period. The implications are many, including another potential cut in 737 monthly production on top of the prior temporary 20 percent reduction. Completed aircraft will all have to undergo software upgrades while additional storage space will need to be garnered. More importantly, the milestone for 2019 aircraft deliveries is now in jeopardy pending a herculean all-out logistics effort in Q4 for delivering aircraft to designated airline customers.

If there is a silver lining, it will likely be that the critical component suppliers will have the opportunity to catch-up or address ongoing product design needs. We feature a follow-on blog that serves as such an opportunity.

Stay tuned.

 

Bob Ferrari

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