Boeing CEO: Lingering engine fix will push back first flight and delivery of 777X

A lingering engine fix on Boeing’s new widebody 777X jet will delay its first flight until early next year and will push back first delivery of the plane until the end of 2020, Boeing CEO Dennis Muilenburg told an investors’ conference in New York early Wednesday.

“We are addressing engine issues, and GE has had some challenges on the first engine that we discovered in some of the reliability testing,” Muilenburg said, discussing the company’s outlook at the Jefferies Global Industrials Conference in New York City.

“They’re making some component changes,” Mulenburg added. “We believe we have our arms around the change that’s required, but some additional testing has to be done yet, and as a result we don’t expect first flight to occur until early next year.”

The further delay of Boeing’s big new jet – already running months later than the company had initially anticipated – marks yet another setback for Boeing, as it grapples with the ongoing crisis of its grounded 737 Max jet program. Delay of the 777X’s entry into service could hit both Boeing’s airline customers and its suppliers.

“We’re still driving towards first delivery by the end of 2020, but there is pressure on that schedule because of the delay in the engine and first flight,” Muilenburg said during the Jefferies conference, audio of which was webcast live.

GE Aviation executives previously revealed at the Paris Air Show in June that their engineers had come up with a fix for the problem with the new GE9X engine, but extensive testing required to certify the engine likely wouldn’t be completed until “later in the fall.” Boeing won’t fly the 777X, which initially had been planned to enter service by the middle of next year, until the engine is certified.

Days before the revelation in Paris, an executive for Gulf carrier Emirates, the first customer of the 777X, had said delays in the jet program could squeeze the airline’s timeline, which then depended on taking delivery of the first jet next June.

That timeline won’t be met. According to Muilenburg’s statement Wednesday, the first delivery now won’t occur until at least the end of 2020.

It typically takes a year or more to go from first flight, through the certification of the airplane by the Federal Aviation Administration (FAA), to entry into service – assuming no unexpected hitches. On the 737 MAX program, for example, the plane entered commercial service 16 months after first flight.

Still, Muilenburg presented a rosy outlook to investors for the 777X program and Boeing in general.

“The airplane itself is looking really good in the factory and gauntlet testing,” he said. “We’ve got to work our way through the engine, get up first flight early next year, do the flight test program and then begin delivering airplanes. The backlog, the orders opportunity, the way it will fit with our airline fleet networks – it’s going to be a great airplane.”

As for its troubled 737 MAX program, Boeing still remains optimistic the jet will win regulatory approval to return to service “early in the fourth quarter,” Muilenburg said.

The MAX has been grounded since March, following the second of two crashes within five months that killed 346 people. A problem with an automated anti-stall flight control system, known as MCAS, has been implicated as a contributing factor in both crashes. Boeing is now working on a software overhaul for the flight control system.

“We still anticipate submitting that certification package to the FAA in the September time frame, so working towards a return to service for the MAX early in the fourth quarter,” Muilenburg said.

The chief executive added Boeing is now working “on training and education materials” and is “out doing simulation sessions” with airline customers around the world to ensure a quick return of MAX jets to fleet operations when regulatory approvals come.

The company also is now working with the more than 600 suppliers to the MAX chain to ensure “the production system’s health and stability,” he said.

Boeing announced in July it would take a $4.9 billion charge in the second quarter to compensate airline customers for delayed deliveries and disrupted schedules due to the MAX’s grounding – causing the biggest quarterly loss in company history. Still, Muilenburg painted an optimistic outlook for investors.

“The long-term prospects of our business remain very solid, and we still expect this to be a year-over-year cash growth business long-term,” he said.

During the jet’s grounding, Boeing has slowed production rate of the MAX from 52 airplanes per month to 42. The company hasn’t yet resorted to layoffs, nor has it lost any orders with “4,400 MAXs in backlog,” Muilenburg said. Once the return-to-service approvals come, the company plans to ramp up production of the MAX to 57 planes per month, he said.

Meantime, the FAA’s certification program that in recent years has delegated much of its oversight of new Boeing aircraft safety to Boeing itself has come under intense scrutiny.

When asked about the company’s contingency plans should the regulatory approvals for returning the MAX to flight prove longer than expected, Muilenburg reiterated that “lower production rates or a temporary shutdown to the production line” in Renton remain an option.

“Those are not decisions that we would make lightly,” he added. “If you think about our production line – again, 600 some suppliers – hundreds of thousands of jobs that would be impacted.”

Boeing remains optimistic about the future of the MAX, Muilenburg added.

“We know that it will take some time to rebuild public confidence, but we do believe with the software updates, the MAX will be one of the safest planes ever to fly,” he said. “We are very confident in that.”