By Robert Wall and Andrew Tangel 

PARIS -- With the grounding of Boeing Co.'s 737 MAX airliner stretching into its fourth month, some suppliers are reconsidering their decision to keep making parts for the plane at full steam, as inventories swell and a timeline for recertifying the plane remains hazy.

That is starting to damp a yearslong boom in jetliner production that has supercharged profits across the industry. The heady demand for parts to make all those planes, though, also has strained supply lines, leading to shortages of things like engines and seats.

The MAX-inspired pause comes as executives gather here next week for the city's once-every-two-years aviation-industry bonanza, a venue where plane makers and suppliers typically hash out issues.

German seat maker Recaro Aircraft Seating GmbH initially kept production lines going full throttle but now is dialing back, Chief Executive Mark Hiller said. With some airlines pushing back delivery plans of their MAX aircraft, fewer seats are needed in the short term, he said.

"We are still producing for the MAX, just at a lower level," Mr. Hiller said.

The Paris show is normally dominated by a race between Boeing and rival Airbus SE to announce new jet orders. This year, that competition is essentially on hold until the MAX -- which has driven Boeing's order book -- is back in the air.

"We do not see anyone ordering the MAX until the grounding is lifted," Credit Suisse aerospace analyst Olivier Brochet said this month.

The grounding has delivered a financial hit to airlines that have bought the plane, triggering a handful of profit warnings. Airlines meanwhile face other headwinds, including rising labor costs and a slowdown in the cargo business. This month the International Air Transport Association cut its projections for 2019 collective airline-industry net profit by 21%, the sharpest adjustment in several years. It estimated the industry would deliver $28 billion in profit, the lowest level since 2014.

Suppliers, though, had largely kept pumping out parts, betting that the grounding would be relatively short-lived. Some even saw it as a chance to catch their breath, after years of scrambling to meet Boeing's and Airbus's blistering deadlines. Stopping production, and then starting back up again, can be more costly and disruptive than keeping assembly lines humming, even at the expense of building inventories.

CFM International, the joint venture between General Electric Co. and Safran SA, which makes the MAX's engines, has so far kept producing at its pre-grounding target rate. But CFM President Gaël Méheust said he was now considering slowing that down. He used the lull to get production back on schedule, after it fell behind amid a surge in demand for the engines.

Apart from figuring out how to meter output, Mr. Méheust has assembled a task force to make sure the company can quickly provide technical support to airlines once the MAX is cleared to fly again. Around 500 MAX planes have been idled. Many of their engines will need some maintenance from the manufacturer before airlines can use them again.

Some suppliers aren't slowing down. Tom Gentile, chief executive of Spirit AeroSystems Holdings Inc., which makes the fuselage for 737s, said the company would still build 52 of them a month -- unchanged since before the grounding and matching Boeing' pre-grounding output for the plane. Boeing has since throttled back to 42 planes a month during the grounding.

Mr. Gentile said Boeing pays for the parts on delivery, but Spirit is keeping them at storage sites. The large fuselages are lined up outside the company's Wichita, Kan., facility. It is storing wing flaps and pylons, used to mount engines, indoors. Spirit has suspended financial guidance until there is more clarity on the MAX grounding.

Aviation authorities grounded the jet after two fatal crashes, one in Indonesia last year and one earlier this year in Ethiopia, claiming 346 lives altogether. Boeing has vowed to fix a faulty flight-control system at the center of both crashes. The Federal Aviation Administration must certify the software before approving the MAX to fly again. Other safety regulators around the world have said they would need their own assurances.

In addition to the MAX crashes and grounding, global trade tensions, particularly between the U.S. and China, are further darkening the business outlook as executives arrive for the Paris Air Show. Geopolitical tensions, especially in the Mideast, are also weighing on sentiment.

"There is just a lot going on militarily and economically that might give pause to people buying aircraft," said Robert Lineberger, head of Deloitte's aerospace practice. The consulting firm forecasts 785 to 870 orders this year at the show, for the most common jetliners seating more than 110 passengers. That compares to 907 orders in Paris two years ago.

Deteriorating trade relations also mean the outlook could worsen, IATA Chief Economist Brian Pearce said this month. Rising labor costs and demand weakness, particularly for airfreight, are denting earnings.

"I am approaching the marketplace with a slightly higher degree of sobriety," Airbus Chief Commercial Officer Christian Scherer told reporters this month. Still, he said he was "not currently worried about a serious slowdown in our commercial activity."

Airbus could provide the biggest splash at the show with the potential launch of a new plane, dubbed the A321XLR. The plane seeks to become an alternative to Boeing's out-of-production 757 midsize jet. That aircraft is larger than Boeing's MAX but smaller than the 787 Dreamliner. It would be Airbus's longest-range single-aisle plane, aimed to serve transatlantic markets that were once the playground primarily for wide-body planes.

At the start of the year, Boeing was widely expected to launch its own midsize plane, but industry officials say the MAX crisis has now made that unlikely.

Write to Robert Wall at robert.wall@wsj.com and Andrew Tangel at Andrew.Tangel@wsj.com

 

(END) Dow Jones Newswires

June 13, 2019 09:12 ET (13:12 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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