Boeing reduces production of 737 MAX aircraft

A plane in the sky.
A 737 MAX. Photo credit: Reuters

Boeing Co plans to reduce its monthly 737 aircraft production by nearly 20 percent as it works to manage the grounding of its MAX aircraft in the wake of two deadly crashes, the company says.

Deliveries of Boeing's best-selling aircraft were frozen after a global grounding of the narrow body model following the crash of an Ethiopian Airlines jet on March 10.

Starting mid-April, production will be cut from 52 planes per month to 42, the company said in a statement.

The company now knows that a chain of events caused a Lion Air crash in Indonesia last October and the Ethiopia disaster, with erroneous activation of so-called MCAS anti-stall software "a common link" between the two.

Boeing said it continues to make progress on a 737 MAX software update to prevent accidents like these from ever happening again.

Boeing had been planning to speed up production again in June to 57 a month.

Shares in Boeing Co fell around one percent after the market closed on Friday.

The 737 MAX is banned from flying in most countries across the world following the Ethiopia crash that killed all 157 people on board.

Boeing faces logistical issues in finding places to park the growing number of grounded 737 MAX planes, as well as being responsible for all their maintenance costs since it has been unable to deliver the jets to customers, two people briefed on the situation said.

Manufacturers avoid halting and then resuming production as this disrupts supply chains and can cause industrial snags.

One source said it would take up to six months to re-start production of such a complex supply chain once it had been stopped, but cautioned a complete halt was unlikely.

Having to hold planes in storage without delivering them does, however, consume extra cash through increased inventory.

Reuters