Weight of Economic Losses Could Spur Early Ungrounding of the Boeing 737 MAX

February 3, 2020

It has been almost a full year since the Boeing 737 MAX aircraft was grounded in March 2019 following two catastrophic crashes. The faulty MCAS software system, new to this model of aircraft, caused two flights to nosedive, leading to the death of 346 passengers and crew. In the months since the crash, news came to light that Boeing did not properly alert the FAA or commercial airline pilots about the new software system’s presence on the plane or that it could be activated by a single point of failure.

Boeing spent 2019 under heavy criticism for its handling of the aircraft’s rollout and response to the crashes. Amid several congressional hearings, accident investigations, and public relations blunders, Boeing has repeatedly assured the public that the plane would soon take to the skies again. America’s major airlines have repeatedly cancelled its flights on the beleaguered plane for months at a time, promising that it would reenter service in July, then September, then December, then February.

The speculation finally ended, for the time being, when Boeing announced on January 20, 2020 that it would temporarily halt production on the 737 MAX. The decision to stop building new aircraft indicates that the manufacturer may expect a longer wait before the FAA approves the plane to fly again.

That decision has delivered a major hit to the broader economy, with many investment firms and government officials predicting that the production halt alone could lower 2020 first quarter GDP by as much as half a percentage point. Indeed, Boeing is the United States’ biggest exporter, and with the company sourcing parts from a multitude of companies, including engines from General Electric, the production halt will have major ramifications for companies and employees, both in Boeing and across the country. For now, Boeing has said it will not layoff employees, but that could change as months drag on, both for its own employees and the companies it sources parts from.

Publicly, new FAA Administrator Steve Dickson has said the agency will take its time to make sure the plane is absolutely safe to fly. In December 2019, Dickson said, “We’re going to follow every step of the process, however long that takes. I’ve made it clear that I’m going to support my people and that means they are going to take whatever time it takes to get this process completed and to do it the right way.”

Amid a contentious reelection campaign, President Trump has repeatedly touted strong economic indicators as evidence of his success and prospects for reelection. The President is well aware of the economic hit halted production will deliver. At a January 15, 2020 event to tout a trade deal reached with China, the President told Boeing Chief Financial Officer, Greg Smith, “Get that going. Work together. We’ve got to get that one moving fast and it’s going to be better than ever, I think.” The next week, in a CNBC interview, the President called Boeing a “very disappointing company.”

While FAA Administrator Dickson has repeatedly sworn he will not return the aircraft to service until he is assured of its safety, President Trump is known for exerting heavy pressure on his cabinet, legislators, and advisors. With the November presidential election drawing ever nearer, pressure could build to resume manufacturing and subsequently, commercial flights. On January 24, 2020, Dickson called airline executives to inform them that he forecasts a return to service before mid-year 2020, sooner than some experts predicted. When that date does eventually come, Dickson, Boeing, President Trump, and major airlines are sure to be under heavy scrutiny to ensure there is a seamless and safe return to flight.

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