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Boeing’s 737 Max May Make ‘Phased’ Return, CEO Says

Julie Johnsson

(Bloomberg) -- Boeing Co.’s 737 Max may return to service on a “phased” timetable if regulators around the world approve the grounded jet to fly at their own pace instead of closely following the lead of U.S. officials.

“The principle schedule risk on that continues to be regulator alignment around the world,” Chief Executive Officer Dennis Muilenburg said Wednesday after reiterating the company’s estimate that the Max will be approved to return early in the fourth quarter. “A phased ungrounding amongst regulators around the world is a possibility.”

The next few weeks will be critical for the planemaker as the flying ban on the Max approaches the six-month mark. Boeing engineers are wrapping up work on more than 500 queries from global regulators, who have delved into the jet’s flight-control system beyond the software linked to two fatal crashes.

But it’s unclear whether airworthiness officials around the world are prepared to move in lockstep with the Federal Aviation Administration, which has primary oversight because the Max is built in the U.S. The agency’s counterpart in the European Union has recently stressed that it is carrying out an independent review that will include week-long flight tests of the Max, the newest version of the workhorse 737.

Boeing extended gains while Muilenburg spoke at a Morgan Stanley conference, and the shares advanced 3.4% to $382.15 at 2:17 p.m. in New York. With some analysts predicting the Max crisis could drag into 2020, investors were relieved to hear Muilenburg’s assurance that Boeing is making “solid progress.”

European Scrutiny

U.S. regulators have established a certification management team for the Max, meeting regularly with counterparts from Europe, Canada and Brazil, the CEO said. Boeing has completed 600 flights testing its redesign of the system, known as MCAS, that has been linked to the two accidents.

Since mid-year, the planemaker has done a “second-wave evaluation” of the entire Max software and flight control systems with regulators, he said.

Even so, the European Union Aviation Safety Agency has signaled its concerns with the jetliner along with plans to send its own pilots to the U.S. to test redesigned systems. Among other things, EASA is examining whether the Max’s angle-of-attack sensors are sufficiently robust.

Sensor Malfunction

Both crashes -- one in Indonesia in October, the other in Ethiopia in March -- occurred after a malfunction of one of the sensors, which measure whether the plane’s nose is pointed up or down relative to the oncoming air.

Muilenburg acknowledged that EASA has expressed concern with Boeing’s angle-of-attack architecture, which relies on two sensors while Airbus SE’s A320 family uses three. But he suggested that the matter could be addressed without modifying the Max with new hardware.

“I don’t see those as divisive,” Muilenburg said of the EASA queries. “I just think those are questions that we need to answer as part of the process. Questions around things like angle of attack, system design, recognize that our architecture on Boeing airplanes is different than Airbus airplanes.”

‘Bare Minimum’

EASA told Bloomberg on Tuesday that having two vanes is considered “the bare minimum requirement to meet the safety objectives.” But the agency also said that the issue could be addressed through flight-crew procedures and training, design enhancements “or a combination of the two,” EASA said.

Aviation executives have expressed worry that a widening split between regulators in the U.S. and Europe will extend the grounding, potentially sowing confusion and anxiety as officials work to approve the resumption of commercial flights.

AerCap Holdings NV CEO Aengus Kelly and United Airlines Holdings Inc. CEO Oscar Munoz were among executives sounding the alarm over the increasingly tenuous alliance last week.

Alexandre de Juniac, who heads the International Air Transport Association, a trade group for airlines, said he was “worried and disappointed” by the lack of unity among regulators. Air Lease Corp. founder Steven Udvar-Hazy called it “uncharted territory.”

Supply-Chain Risk

Lifting the Max grounding would clear airlines to bring the plane out of storage while enabling Boeing to resume deliveries of its best-selling jet. But if the reviews are delayed or another technical issue emerges, the Chicago-based planemaker will face tough decisions over whether to slow or even temporarily halt work at a Seattle-area factory.

One risk for Boeing is long-term damage to its supply base. Subcontractors on the Max could shift capacity to other manufacturers, including Airbus, or lay off thousands of workers.

Boeing is playing close attention to workforce issues and the health of its supply chain as it studies production options, Muilenburg said. The company’s “bias” is to continue to churn out the jets at the current 42-per-month pace while awaiting regulators to clear the Max to fly, he said.

(Updates with new details of Max review in sixth paragraph.)

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