By Doug Cameron and Andy Pasztor
Boeing Co. botched the first demonstration flight of a
long-awaited space capsule and said it wouldn't take any more 737
MAX fuselages from its biggest supplier, setbacks that pushed the
aerospace giant deeper into crisis Friday.
The prolonged grounding of the MAX fleet and Boeing's decision
days earlier to suspend production of the jetliners were already
weighing heavily on the company and Chief Executive Dennis
Muilenburg.
The high-profile failure of the Starliner on Friday to reach the
correct orbit under its own power -- scuttling the capsule's
planned docking with the International Space Station -- was a fresh
blow to Boeing as well as to U.S. efforts to return astronauts to
space using a domestic vehicle. No one was aboard the
spacecraft.
Following a flawless predawn launch of the Starliner from
Florida by a Russian-powered Atlas V rocket, officials from the
National Aeronautics and Space Administration and Boeing told
reporters at a hastily convened press conference that a software or
automation problem with the capsule stranded it in the wrong orbit
without adequate fuel to rendezvous with the space station.
The mistake, stemming from a fundamental error setting an
internal clock on the spacecraft, raised new questions about
Boeing's technical and management prowess. The problems with the
737 MAX have been linked to flawed design work.
Mr. Muilenburg has faced calls from some lawmakers and victims'
families to step down over his handling of work to address
potential flight-control flaws and get the MAX flying again after
two fatal crashes that took 346 lives.
A company spokesman said Friday that Boeing's chairman, Dave
Calhoun, stands behind his comments in early November on CNBC that
the board of directors has confidence in Mr. Muilenburg.
But the Starliner's problems suggest the woes of Boeing's
commercial-jet business could undermine broader strategic goals.
The Chicago company's defense, space and services units are crucial
to bolstering a balance sheet weakened by the MAX grounding and
suspension of deliveries, which prompted S&P Global Ratings and
Moody's Investors Service to downgrade Boeing's credit rating this
week.
Mr. Muilenburg, who was in Florida on launch day, ran the
company's defense and space business until 2013. He has been vocal
about the company's ambitious plans for the sector, telling
associates over the years that civil space initiatives had
long-term strategic and public relations significance beyond
anticipated financial returns.
The focus on returning the MAX to service has consumed
management's time as well as the company's capital, making it
tougher to sell new planes and disrupting Boeing's broader jetliner
strategy, which includes plans for a new midsize aircraft.
The latest setbacks, coupled with United Airlines Holdings
Inc.'s announcement Friday that it removed the MAX from its
schedules until June 4, highlighted the daunting crisis facing
Boeing leaders
No large shareholders have joined in the public calls for Mr.
Muilenburg to step down. Though Boeing shares have traded in a
narrow range for much of the time since the MAX's grounding in
March, the stock dropped 10% this month as the aircraft's expected
return to service was pushed back, portending less cash flow from
customers. The recent halt to MAX production is expected to raise
costs and put more stress on Boeing's 150,000-strong workforce and
the global aerospace supply chain.
Boeing this past week said it planned to suspend MAX production
in January after amassing around 400 undelivered jets, now stored
around the country. The move follows criticism from regulators that
Boeing was overly optimistic in its expectations for the MAX to be
recertified for commercial flight.
President Donald Trump called Mr. Muilenburg last weekend to
discuss the production halt, according to people briefed on the
conversation. The president asked about the duration of the
shutdown, one of these people said.
Boeing hasn't said how long the suspension might last and said
it doesn't anticipate layoffs or furloughs. Around 12,000 staff
assemble the plane at a plant near Seattle.
Boeing originally planned to have delivered about 1,000 of the
planes to airlines and lessors by June next year, which would
represent some 5% of the global airliner fleet. Carriers have been
forced to cancel thousands of flights and hang on to older planes
since the MAX's grounding following a second fatal crash in five
months.
Boeing has set aside an initial $6.1 billion for customer
compensation. It has also booked $3.6 billion in charges to cover
the slowdown in MAX production. Analysts think both numbers could
double when Boeing announces its fourth-quarter earnings on Jan.
29.
Rival Airbus SE has snagged orders with its A321neo, which is
larger and flies further than the MAX. United this month ordered 50
of the A321neo, the first Airbus order by the carrier since
2002.
Spirit AeroSystems Holdings Inc., the largest MAX supplier, said
Boeing told it to stop making fuselages for the plane from Jan. 1
at its plant in Wichita, Kan. Spirit has kept making 52 fuselages a
month even after Boeing reduced its MAX output in April to 42.
Spirit relies on the MAX for half of its revenue, and the
enforced shutdown of its three MAX lines is expected by analysts to
ripple through a network of 600 main suppliers for the plane -- and
through the broader economy. Boeing is the largest U.S.
exporter.
Most suppliers have said they would rather maintain some
production to make it easier to ramp up again and retain staff in a
tight labor market for aerospace engineers and mechanics.
The sole supplier of engines for the MAX, the CFM International
joint venture between General Electric Co. and Safran SA, plans to
shift resources to make more for a rival Airbus jet, according to
people familiar with the situation.
The Starliner's orbital failure hit Boeing particularly hard
because prior to the launch some inside and outside the company had
seen the mission as a chance to demonstrate an ability to deliver
on pledges to NASA. The uncrewed test flight occurred more than
three years later than initially envisioned.
NASA officials said if astronauts had been on board the capsule
they would have been safe despite the thruster misfires. Nicole
Mann, one of two NASA astronauts slated to fly the first crewed
Starliner mission, reiterated the importance of maintaining
manual-control alternatives. "We have the capability on board to
stop the automation and take over manually to fly," she told
reporters.
Before Friday's events, Boeing had signaled it hoped to
transport the first crew to the space station by summer. Now that
timetable is under review, with Jim Chilton, senior vice president
of Boeing's space and launch businesses, indicating that engineers
will seek out the cause of the problem.
NASA chief Jim Bridenstine told reporters it was premature to
comment on whether another uncrewed demonstration flight would be
required before astronauts belt into a Starliner capsule.
The Boeing CEO has touted that the first astronaut to land on
Mars would likely travel on a Boeing-made rocket. "I think this is
the most exciting time in our country's space program in decades,"
he said in a speech last year. "We're working on things now that
are bigger than the Apollo program."
--Alison Sider, Andrew Tangel and Benjamin Katz contributed to
this article.
Write to Doug Cameron at doug.cameron@wsj.com and Andy Pasztor
at andy.pasztor@wsj.com
(END) Dow Jones Newswires
December 20, 2019 19:29 ET (00:29 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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