Boeing Co bowed to a growing cash squeeze by suspending commercial 737 production from January for the first time in more than 20 years, as the grounding of the planemaker’s best-selling MAX after two fatal crashes drags into 2020.
Boeing, which builds the 737 south of Seattle, said it would not lay off any of the roughly 12,000 employees there during the production freeze, though the move could have repercussions across its global supply chain and the U.S. economy.
The decision at a two-day board meeting came after the Federal Aviation Administration refused to approve the jet’s return to service before 2020 and delivered what was seen as a public rebuff to Boeing’s hopes of moving faster.
The 737 MAX has been grounded since March after two crashes in Indonesia and Ethiopia killed 346 people within five months, costing the plane manufacturer more than $9 billion so far.
The decision to halt production will have little immediate impact on airlines that have already seen deliveries halted, forcing many to cancel flights or lease older replacements.
But it marks a deepening of a crisis that has already seen Boeing’s fastest-selling jet grounded worldwide, its safety record scrutinized, customers pressing for compensation and its cornerstone relationship with the FAA placed under strain.
Boeing did not say how long the shutdown might last, stressing this was up to the FAA. Previous efforts to predict when the 737 MAX might return to service after software training changes had drawn a sharp response from the U.S. regulator.
The FAA said it would not comment on what it described as a Boeing business decision but would continue to work with global regulators to review proposed changes to the 737 MAX.
“Our first priority is safety, and we have set no timeframe for when the work will be completed,” the agency said.
Analysts said the shutdown was inevitable after Boeing was forced to abandon its end-year goal for returning to service.
“It is not a surprise that they don’t continue producing planes that don’t have a home,” said Adam Pilarski, senior vice president at Virginia-based consultancy AVITAS.