Trump Will Suck Airbus Into the Crisis at Boeing
Another 737 Max Design Flaw, Not Just Software
Hundreds of 737 Max jets are grounded as Boeing seeks approval to return the planes to active service. Unfortunately, the and FAA audit turned up a new problem, wiring.
The company is looking at whether two bundles of critical wiring are too close together and could cause a short circuit. A short in that area could lead to a crash if pilots did not respond correctly, the people said. Boeing is still trying to determine whether that scenario could actually occur on a flight and, if so, whether it would need to separate the wire bundles in the roughly 800 Max jets that have already been built. The company says that the fix, if needed, is relatively simple.
The company may eventually need to look into whether the same problem exists on the 737 NG, the predecessor to the Max. There are currently about 6,800 of those planes in service. The senior Boeing engineer said that finding such problems and fixing them was not unusual and not particular to the Max or to Boeing.
Long Standing Issue
My aviation contact offered these comments.
Yes, it's a long standing issue with wire bundles being too close to each other, overheating and causing a fire. Problems continue. it is a 1960's design that was continually modified. There should have been a new design 15 yrs ago, but it didn't happen.
World demand has shifted to single aisle airplanes (like 737) from the double aisle (like 787, 777). Airbus is flat sold out for years with the A320 series and cannot alone satisfy world demand. That is why the MAX backlog has held up.
Asia growth in passenger traffic is huge. Before the crashes, Boeing was making 52 MAXes a month and had plans to go to 57 and later 62. In my day, 10 airplanes a month was considered good.
The Wall Street Journal reports Boeing 737 MAX Problems Hit Supplier Triumph Group’s Stock and Bonds
"Moody’s could downgrade Triumph if MAX production doesn’t resume before second half of 2020"
Delays and Costs Mount
Every delay, even minor wiring issues add to problems at Boeing.
Further compounding the delays, the FAA is thinking of imposing mandatory simulator training on the MAX.
Boeing's Max Crisis Takes Another Costly Turn
Bloomberg reports Boeing's Max Crisis Takes Another Costly Turn
The airplane maker on Tuesday said it would recommend pilots undergo flight-simulator training on its 737 Max before the embattled plane returns to service, reversing its previous stance that computer-based education would be sufficient. The about-face on training amounts to a concession that the Max was in fact fundamentally different than earlier 737s and that pilots weren’t properly informed of or prepared to deal with its features – despite Boeing’s repeated efforts to argue otherwise in the initial certification process and throughout the Max crisis.
And make no mistake, this decision will cost Boeing. The company reportedly made a deal with Southwest Airlines Co. to reduce the cost of each Max plane by $1 million if simulator training was required. Southwest ordered 280 Max jets so that alone may be a hit of nearly $300 million.
Trump Getting Anxious
Trump is anxious to get these planes back into service because Airbus is picking up orders and Boeing isn't.
Thus this pontification from Leeham.
Airbus Almost Certain to be Hurt by MAX Crisis
Please consider Pontifications: Airbus Almost Certain to be Hurt by MAX Crisis
In LNA’s 2020 Outlook last week, we pointed out that the long-running trade war between the US and European Union could be coming to a head this year. Airbus and the EU are waiting for the World Trade Organization’s authorization to impose tariffs on US products. This decision is expected in May or June. Boeing is expected to be the first target. The Trump Administration last year imposed a 10% tariff on Airbus aircraft.
As 2019 ended, LNA began hearing some ominous reports from multiple sources about what’s coming this year.
1: The Trump Administration is thinking about increasing the tariffs on Airbus aircraft from 10% to 25%. It has WTO authority to boost tariffs to 100% of the value of the airplanes.
2: The Administration is said to be unhappy with EASA, the European certification regulator, taking the stance it has, insisting it wants to independently review and recertify the MAX.
3: And, unrelated to the MAX, the Administration is said to be unhappy that the EU is dragging its feet in approving the Boeing-Embraer joint venture.
As we wrote last week, this is an election year and Donald Trump is running for reelection. Upping the ante in the European trade wars will make him look tough to his base. Never mind that the Federal Reserve concluded the trade wars are hurting the US economy, businesses and workers.
Airbus is almost certain to become a target for higher tariffs. I won’t rule out adding the Mobile (AL) final assembly line to sanctions despite Alabama being the No. 1 supporter of Trump. There is no way Alabama will vote for a Democratic challenger to Trump; it’s a completely safe state.
In Praise of Leeham
My contact has nothing but praise for the analysts at Leeham.
"Leeham is one of the top aviation consultants and respected. They have lot of contacts."
One Front War
Whether or not Trump's Mideast War Fiasco affects things is a mystery, but I have long suspected Trump would ratchet up tariffs on the EU once he had a trade deal with China.
My rationale is Trump does not want to fight a trade war with China and the EU at the same time.
Of course the details of Trump's Amazing Trade Deal are a complete mystery, China disputes some of the reporting, and it isn't signed yet, but presumably the deal is amazing.
Regardless, the key point is we will soon be down to a one front trade war.
Once that happens, there is every reason to suspect Trump will suck Airbus into the Boeing crisis, further slowing global trade.
Meanwhile, please note Housing Consistent With a Recession in 2020.
Good luck with that.
Mike "Mish" Shedlock