Boeing CEO to meet with senators scrutinizing 737 MAX 9 blowout

By Rajesh Kumar Singh, David Shepardson and Tim Hepher

WASHINGTON (Reuters) -Boeing CEO Dave Calhoun will meet this week with U.S. senators to answer questions about the 737 MAX 9 grounding, as executives for longtime customer United Airlines raised questions over billions of dollars of orders for MAX 10 jets.

Calhoun is set to hold meetings starting Wednesday on Capitol Hill. He is scheduled to meet with Senators Ted Cruz, a Republican, and Mark Warner, a Democrat, among others following the mid-air blowout of a cabin panel on a new Alaska Airlines jet, sources told Reuters. Boeing (NYSE:) declined to comment.

Calhoun will also meet with Senator Maria Cantwell, who chairs the Commerce Committee. Last week, she said she plans to hold a hearing after the Federal Aviation Administration (FAA) grounded 171 MAX 9 airplanes. A spokesperson for Cantwell said she was meeting with Calhoun at Boeing’s request.

Cantwell and Cruz, the committee’s top Republican, held a closed-door briefing last week on the grounding with FAA Administrator Mike Whitaker and National Transportation Safety Board Chair Jennifer Homendy.

Numerous lawmakers on Capitol Hill have questioned Boeing. The company told Senators Ed Markey, JD (NASDAQ:) Vance and Peter Welch in a previously unreported Jan. 17 letter that it was working to “restore trust with out regulators and our customers.”

United Airlines CEO Scott Kirby (NYSE:) said on Tuesday the airline, which has ordered 277 MAX 10 jets with options for another 200, would build a new fleet plan that does not include a model already mired in regulatory and delivery delays.

The FAA grounded most of Boeing’s MAX 9 jets for checks after a plug replacing an unused exit door tore off an Alaska Airlines jet on Jan. 5, forcing an emergency landing.

Industry watchers have been seeking concrete signs that Boeing’s woes with the MAX 9 and the legacy of earlier MAX safety groundings are undermining support for the larger MAX 10, which makes up more than a fifth of outstanding MAX orders.

“I think the MAX 9 grounding is probably the straw that broke the camel’s back for us,” Kirby said in an interview with CNBC on Tuesday.

Boeing, which is under pressure from regulators and customers over quality control issues, said it would hold a quality stand down on Thursday at the Seattle-area location where it makes 737 aircraft, pausing production and delivery operations for a day.

During the stand down, employees at the factory in Renton, Washington, will attend quality workshops. All other Boeing commercial production and fabrication sites will conduct similar stand downs in the coming weeks, Boeing said on Tuesday.

Boeing shares closed 1.6% lower and are down 15% since the Alaska Airlines incident.

The MAX 10 does not have the same kind of door-plug system as the MAX 9, but the grounding has raised concerns that the incident could delay regulatory approval and delivery of the MAX 10, as well as temper broader plans for higher production.

Alaska Airlines CEO Ben Minicucci said the airline found “some loose bolts on many” MAX 9s during inspections in an interview with NBC News that aired on Tuesday. The FAA is still reviewing data from inspections of an initial group of 40 planes and has not said when it may allow the grounded MAX 9 jets to resume flights.

The FAA on Sunday urged operators of 737-900ER planes with door plugs to immediately inspect them after some airlines had noted “findings with bolts” during maintenance inspections.

MAX 10 DELAYS

After disappointing MAX 9 sales, Boeing is betting on the larger-capacity MAX 10 to dent the runaway lead of Airbus’s A321neo at the busiest end of the market.

Analysts say a full rollout of the MAX line-up is crucial to help Boeing stabilize its roughly 40% share against Airbus and generate sufficient cash.

In the best-case scenario, MAX 10 deliveries are five years behind their original delivery date, United’s Kirby estimated.

He later said United would not cancel the jets, just remove them from internal plans. Industry experts say airlines rarely cancel orders for fear of losing deposits, but often juggle models or else use public pressure to help win concessions.

Boeing Commercial Airplanes CEO Stan Deal said in a statement that the planemaker had “let down our airline customers and are deeply sorry for the significant disruption to them, their employees and their passengers.”

While Kirby’s remarks left questions hanging over the MAX 10 orders, industry sources said the airline also faces a dilemma as it races rivals to meet rising demand.

Airbus is sold out for similar planes until around 2030.

“It is not helpful for the MAX 10 when United, holding orders for 26% of the entire known MAX 10 backlog, says this,” said Rob Morris, head of global consultancy at Ascend by Cirium.

“But what will United do instead?”

Airbus declined to comment.

GE ‘CONFIDENCE’

Some commentators have called for changes in Boeing’s top management and some airline executives also have been privately calling for a reset.

This month, people familiar with the matter told Reuters United had become “incensed” with a supplier with which it shares corporate roots. It has been forced to ground 79 MAX 9 jets for which it had sold seats and on Monday warned of a hit to first-quarter results.

But Larry Culp, the CEO of Boeing’s largest engine maker GE Aerospace, threw his weight behind Boeing’s leadership.

“They’re an important customer. They’re an important partner,” Culp told Reuters, adding Calhoun and he were “in frequent communications on a whole range of issues.”

Asked if he had confidence in the ability of Boeing’s leadership to fix its problems, Culp said: “I have confidence.”