Boeing Co., which has been working for three months to put its troubled 737 Max back in the air, won a tentative agreement Tuesday from British Airways parent International Airlines Group to buy 200 of the airliners, worth $24 billion.
The Max, the latest iteration of Boeing’s widely flown 737 single-aisle jet, has been grounded worldwide since March after two overseas crashes that killed more than 300 people. Both disasters were linked to new anti-stall software that erroneously activated during takeoff, authorities said, and the Chicago-based planemaker is now seeking Federal Aviation Administration approval of a patch to address the issue.
“We are truly honored and humbled by the leadership at International Airlines Group for placing their trust and confidence in the 737 MAX and, ultimately, in the people of Boeing and our deep commitment to quality and safety above all else,” Kevin McAllister, head of the commercial planes business, said in a statement. The two companies signed a letter of intent for the purchase at the Paris Air Show, the aerospace industry’s largest trade gathering.
Boeing shares have fallen 14% to $363.48 since the second 737 Max crash, in Addis Ababa, Ethiopia, which forced the planemaker to slow production and delivery of the best-selling model in its history. Boeing has garnered more than 4,600 orders for the single-aisle jetliner, though just 67 of the aircraft are flown in the United States, and fewer than 400 worldwide.
International Airlines Group is “certain that these aircraft will be a great addition” to its fleet of short-haul airliners, which now relies almost exclusively on A320 single-aisle jets from Airbus, Boeing’s chief rival, said CEO Willie Walsh. “We have every confidence in Boeing and expect that the aircraft will make a successful return to service in the coming months.”
Boeing only began delivering the Max in 2017 and was working to ramp production up to 57 a month, which would have netted a potential $30 billion in sales this year. It has since been forced to reduce the production rate to 42 a month and book a $1 billion charge, since airline customers weren’t accepting deliveries until they could use the plane.
Fewer shipments, which is when Boeing receives the bulk of payment from buyers, and higher costs to store completed planes until they can be turned over to customers, have also curbed cash flow, according to Boeing Chief Financial Officer Greg Smith.
The groundings have scrambled the schedules of U.S. airline customers, including American and Southwest, through most of the lucrative summer travel season and prompted congressional hearings on the FAA’s initial approval of the plane for commercial flights.
In the first crash, in Indonesia in October, a malfunctioning sensor on a 737 Max 8 fed incorrect data on the airliner’s ascent vector to the computer system, which attempted to lower the angle at which it was ascending to avoid a stall, officials said. That prompted a struggle between the new computer software, known as the Maneuvering Characteristics Augmentation System, and the pilot, who ultimately lost control of the aircraft.
The fact that it hadn’t been completed was part of what prompted the high level of concern after the second crash, which occurred outside the Ethiopian capital. It wasn’t until data transmitted to satellites from the flight showed climbs and descents during takeoff, similar to those before the Indonesia crash, that the FAA ordered carriers to park the planes. Regulators in the European Union, China, and Canada had already done so.
International Airlines Group, which controls Aer Lingus, Iberia, Vueling, and LEVEL in addition to British Airways, flies more than 113 million passengers a year and has been a long-time user of larger twin-aisle planes from Boeing.
