Boeing, Airbus Can't Deliver Planes During Government Shutdown
As the government shutdown enters its second week, private industry is feeling the pain. Shuttered government office buildings and frozen contracts have already forced defense contractors to furlough thousands of workers. Now, despite hundreds of Federal Aviation Administration officials returning to work, the continued closure of the FAA's registration office is preventing commercial jet makers from delivering their new products to airlines. A prolonged government shutdown could threaten $1.4 billion in new plane deliveries.
Federal regulations require aircraft manufacturers to get newly built planes certified for safety and registered with the government, critical government functions that have gone unfulfilled since the start of last week's government shutdown. Boeing is mostly able to certify its own planes, but still can't deliver new products while the government is closed.
Boeing has two primary manufacturing and assembly hubs, an established production center near Seattle, Wash., and a new facility built in 2011 in South Carolina. Boeing's veteran Seattle operations are authorized to grant FAA certification via in-house staff, so its planes aren't as affected by the shutdown. The much smaller South Carolina plant, which produces only one or two Dreamliners per month, does rely on government engineers and officials to certify its planes, and these workers have been off the job since the shutdown started more than a week ago.
On Tuesday, the FAA announced that it would put 800 staff back to work, allowing safety certification to continue at both Boeing operations. However, deliveries will still be delayed because even though new Boeing planes can be certified, the FAA registry in Oklahoma remains closed. That means new planes can't be registered, so they can't be legally operated. The last time the government was shut down in 1995, the FAA registry remained open, but now the staff that man the registry have been furloughed. A spokeswoman claimed that aircraft registrations would resume only when the government shutdown ends, indicating the office will not get an early reprieve.
Airbus planes are manufactured and certified outside the U.S., and are therefore less reliant on the American federal government, but in order to deliver planes to U.S. airline customers, Airbus still needs to register planes and file documents including title transfers with federal offices, like the FAA registry, that remain closed for the foreseeable future. Stuck without any way to get the necessary paperwork done, Airbus has had no choice but to miss delivery deadlines. Airbus was unable to deliver aircraft to JetBlue or US Airways that the airliners expected last week, and American Airlines won't get the A319 it expected on Wednesday.
So far, no airline schedules have been affected as new planes typically don't start regular operations for a few months, but the longer the shutdown drags on, the more likely it is that serious delays will start hurting the bottom line. Aircraft manufacturers and airliners alike have little choice but to wait around until Congress reopens the government.
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The article Boeing, Airbus Can't Deliver Planes During Government Shutdown originally appeared on Fool.com.Fool contributor Daniel Ferry has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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