Dive Brief:
- Boeing announced yesterday it is pressing pause on delivery of the 737 MAX 8, its best-selling aircraft, with more than 4,500 planes on order, according to The New York Times.
- The decision comes after the second deadly crash since October involving this model of plane occurred earlier this week, killing all 157 people on board. Regulators around the world, including the U.S. Federal Aviation Administration, grounded the planes as a result.
- "Implications for supply chains and for Boeing, in particular, I think, are huge," Haresh Gurnani, the executive director of the Center for Retail Innovation at Wake Forest University, told Supply Chain Dive in an interview.
Dive Insight:
Airlines can seek compensation from Boeing when a fleet of aircraft is grounded, which could end up costing the company billions of dollars in payments to the airlines, Gurnani said.
In addition, jets don't typically stick around at the production plant once they're manufactured. At the current production level of two to three planes per day, Boeing will have to figure out where to put its inventory, Gurnani said.
"Boeing has to find adequate parking space to keep those planes," he said. "And that's the extra cost for Boeing."
If the outstanding orders for the aircraft are canceled then this could, in turn, affect suppliers who provide components for the plane. This would be years down the line, though, given the current length of backorders.
Boeing did not provide answers to multiple questions sent by Supply Chain Dive, including how it plans to deal with the planes rolling off the production line and if there have been any changes to manufacturing.
One thing Boeing has on its side is the small scale of the aerospace industry, which "is dominated by a handful of large manufacturers and Boeing has historically maintained a strong brand reputation," a
spokesperson for CreditRiskMonitor told Supply Chain Dive.
Both Southwest Cargo and American Airlines Cargo have issued service alerts related to the grounding of the 737 MAX 8 aircraft. American Airlines said approximately 85 daily flights would be affected. Southwest said it has 34 MAX 8 planes in its fleet. United Airlines told Supply Chain Dive it was "not seeing significant impact" as a result of the grounding.
"We are working hard to ensure our Cargo Customers do not feel the brunt of the impact and we appreciate their patience as we work through this issue," a Southwest spokesperson told Supply Chain Dive. A spokesperson for American Airlines similarly said it is working with cargo customers who have been impacted.
