Boeing Halts Flights of New Jet -- Update

By Doug Cameron Features Dow Jones Newswires

Boeing Co. said Wednesday that it had suspended flight tests of its new 737 Max jetliner because of problems with its engine, though still planned to deliver the first plane to its customer this month.

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The company announced a "temporary suspension" of flights, just days before the first of the single-aisle jets was due to be flown to Malaysia. The jets are due to be operated there by a unit of Indonesia's Lion Air, the launch operator.

Boeing has secured 3,700 orders for the 737 Max, powered by Leap engines made by the CFM joint venture between General Electric Co. and Safran SA.

"We will work closely with CFM to understand the precise scope and root cause of the quality issue," Boeing said in a statement.

Teething problems are common with complex new aircraft programs. Airbus SE has also encountered problems with initial engines powering its new A320neo jet made by the Pratt & Whitney unit of United Technologies Corp., forcing the plane maker to reduce output of the jet.

Airbus has deferred some production to next year to ensure sufficient Pratt & Whitney engines are available. Air Lease Corp., the aircraft lessor, last week said Airbus was also delaying some deliveries of A320neo jets powered by a version of the CFM Leap.

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Cai von Rumohr at Cowen & Co. said in a client note that he saw the problem with Boeing's engine as "an easily fixable sub-tier supplier component issue" rather than a design problem.

Boeing shares fell around 3.5% before recovering somewhat to close down 1.3%. GE shares also lost ground, settling 0.8% lower.

GE and its partner invested heavily ahead of a huge planned ramp in production of the Leap engine powering the 737 Max, wary of the problems suffered by Pratt & Whitney.

Boeing plans to deliver around 75 new 737 Max jets this year to customers, including Southwest Airlines Co. and American Airlines Group Inc. The first plane was due to start flying on May 19 for Malindo Air. Boeing didn't give a new delivery date.

Norwegian Air Shuttle ASA, which is also expecting to receive jets this month, said it had been informed by Boeing of the issue and given new delivery dates with only a few days delay that wouldn't affect the launch of some new flights.

Write to Doug Cameron at doug.cameron@wsj.com

(END) Dow Jones Newswires

May 10, 2017 16:56 ET (20:56 GMT)