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Former Boeing Employee Who Warned of 737 Problems to Testify

WASHINGTON, Dec 9 (Reuters) – A former Boeing Co employee who warned of problems with 737 production will testify on Wednesday at a U.S. House hearing on the Federal Aviation Administration review of the grounded 737 MAX.

The aircraft has been grounded since March after two fatal crashes in five months killed 346 people. Federal officials say the FAA is not expected to authorize the plane to fly until January at the earliest.

Former Boeing employee Edward Pierson, who had worked as a senior operations manager in the flight test and evaluation unit, will testify before the U.S. House Transportation and Infrastructure Committee, the panel said in a notice.

Pierson’s concerns were referenced at an Oct. 30 hearing — though he had not been named previously.

“All my internal warning bells are going off and for the first time in my life, I’m sorry to say that I’m hesitant about putting my family on a Boeing airplane,” Pierson wrote to Boeing management in mid-2018 before the first crash, according to an email obtained by the committee. He warned “the alternative of rushing to build is far riskier.”

Boeing spokesman Gordon Johndroe said Monday that “although Mr. Pierson did not provide specific information or detail about any particular defect or quality issue, Boeing took his concerns about 737 production disruption seriously.” He added that after Pierson retired and raised the issue again as recently as this year “those concerns received renewed scrutiny at the highest levels of the company.”

Johndroe added “the suggestion by Mr. Pierson of a link between his concerns and the recent MAX accidents is completely unfounded.”

Pierson could not immediately be reached on Monday.

Representative Albio Sires, a Democrat, on Oct. 30, questioned Boeing CEO Dennis Muilenburg about concerns raised by a Boeing employee about Boeing’s 737 production and his recommendation that production be halted. Sires said the employee wrote directly to Muilenburg in December 2018 after he had retired.

Johndroe confirmed Monday Pierson was the employee referenced by Sires.

“He raised some good concerns. We went back and took a look at his concerns and in some cases we identified areas where we thought his issues had already been addressed,” Muilenburg said at the hearing. Boeing did not slow production after Pierson’s concerns.

FAA Administrator Steve Dickson, FAA Aircraft Certification Service Executive Director Earl Lawrence and a member of the FAA’s Technical Advisory Board, Matt Kiefer, as well as former FAA employee G. Michael Collins will also testify.

(Reporting by David Shepardson; Editing by Dan Grebler and Lisa Shumaker)

Tesla Shares Skid After First-Quarter Deliveries Disappoint

FILE PHOTO: A Tesla logo is seen at a groundbreaking ceremony of Tesla Shanghai Gigafactory in Shanghai, China January 7, 2019. REUTERS/Aly Song/File Photo

(Reuters) – Tesla Inc shares fell more than 8 percent on Thursday after a bigger-than-expected drop in first-quarter deliveries, led by waning demand for its luxury Model S and X vehicles, added to worries about the electric carmaker’s finances.

At least four Wall Street brokerages cut their price targets on the company’s stock, citing concerns about profitability and revenue after deliveries of the higher-priced luxury cars more than halved compared to the fourth quarter.

RBC analysts called Model S/X deliveries “very disappointing” and estimated the numbers would translate to a more than $1 billion shortfall in revenue compared to previous estimates.

The company had already flagged in February that it expected to post a first-quarter loss as it launched its cheaper $35,000 version of the Model 3 sedan.

In the quarter, Tesla delivered 50,900 Model 3s, the linchpin of its growth strategy, falling short of analysts’ estimates of 58,900, according to IBES data from Refinitiv.

Tesla also pinned the blame for the first-quarter delivery drop to longer transit times, which analysts said could impact cash flow, even though the company claimed it had sufficient cash on hand.

The company said it had delivered only half of the quarter’s numbers by March 21, with 10,600 vehicles still in transit at the end of the quarter. By comparison, only 1,900 vehicles were in transit at the end of the fourth quarter.

Cowen and Co analysts said that the delivery and transit details suggested “cash was likely dangerously low” after Tesla paid off a $920 million convertible bond obligation in cash in the beginning of March.

Still, there were no new downgrades by brokerages on Tesla shares. The company is currently rated “buy” or higher by 12 of the 30 brokerages covering the company, 7 “hold” and 11 “sell” or lower.

The carmaker reaffirmed its forecast to deliver between 360,000 and 400,000 vehicles this year, and said U.S. orders for the new Model 3 outpaced what the company was able to fulfill in the quarter.

Nord LB analyst Frank Schwope called the numbers “more shocking than disappointing” and said there remain doubts whether Tesla could deliver 400,000 cars this year.

Lawyers for Tesla chief Elon Musk will argue on Thursday that he did not violate a fraud settlement with the U.S. Securities and Exchange Commission and should not be held in contempt, the latest twist in a high-profile battle between the billionaire and the government.

Musk’s fight with the SEC, to play out in a Manhattan federal court hearing, has raised investor worries that it could lead to restrictions on his activities or even his removal from Tesla, while distracting him at a pivotal point in the company’s expansion.

(Reporting by Vibhuti Sharma in Bengaluru; Editing by Shounak Dasgupta)

Avianca Brasil Lessor Set to Seize 20% of Airline’s Fleet

SAO PAULO, Jan 11 (Reuters) – Lessor Aircastle is set to repossess 10 jets from Avianca Brasil, the country’s No. 4 airline, after a bankruptcy hearing on Monday, a source familiar with the matter said, potentially disrupting flights for thousands of passengers.

The 10 Airbus A320 planes represent more than 20 percent of Avianca Brasil’s current fleet, according to data provided by Brazil’s aviation regulator, raising doubts about the carrier’s ability to fly its full flight schedule if the aircraft are seized.

And it could lose more planes in the future. Lessor GE Capital Aviation Services and an affiliate are seeking to repossess 12 Airbus A320s from Avianca Brasil, according to James Luton, a GE spokesman.

When the airline filed for bankruptcy protections last month, the airline discussed the possible loss of 14 planes, which it said would affect 77,000 passengers over a three-week period.

A representative for Avianca Brasil declined to comment. The bankruptcy filing came after years of mounting losses and late aircraft payments.

Bankruptcy filings, while providing protection from creditors, do not cover leases, the source of the carrier’s entire 46-aircraft fleet.

Between the end of 2016 and September 2018, Avianca Brasil’s liabilities to aircraft lessors quintupled to 415 million reais ($112 million), according to the carrier’s financial statements.

Still, a Brazilian bankruptcy judge stayed a decision that would have allowed Aircastle to repossess the planes last month. That stay, however, expires on Monday.

Since the stay was issued, the source said, Avianca Brasil has not made any proposal to Aircastle that would have allowed the carrier to keep the planes. Avianca Brasil owes Aircastle more than $30 million, the source added.

The stakes are also high for Aircastle, as Avianca Brasil is its largest single customer, representing some 7 percent of its net book value, according to the lessor’s financial disclosures.

Avianca Brasil is separate from the better-known Avianca Holdings SA, which is based in Colombia. But they share the same owner, a family company owned in part by Bolivian-born airline entrepreneur German Efromovich.

United Continental Holdings gave the family company a $500 million loan last November.

Neither party has revealed why the loan was needed, but Efromovich has been sued for failure to repay his debts in the United States and Brazil in recent years.

($1 = 3.7138 reais)

(Reporting by Marcelo Rochabrun)

US Safety Board Hearing On Southwest Engine Explosion

Nov 14 (Reuters) – The U.S. National Transportation Safety Board is set to hold an investigative hearing on Wednesday about a midair incident in April during which an engine on a Southwest Airlines Boeing 737 exploded over Pennsylvania, killing one passenger.

Dallas-based Southwest has been under intense scrutiny in the months since an engine on a flight headed from New York to Dallas blew apart, shattering a plane window, flinging shrapnel and killing passenger Jennifer Riordan, one of 149 people aboard.

The episode, which has raised concerns about the safety of similar engines, was the first fatality on a U.S. commercial passenger airline since 2009.

The all-day hearing in Washington will focus on the fan blade design and development history of the engine type that failed, a CFM56-7B made by CFM International, a transatlantic joint-venture between General Electric Co and France’s Safran SA, the NTSB said.

The hearing will also focus on engine fan blade inspection methods and engine fan blade containment design and certification criteria, the NTSB said.

Representatives from Chicago-based planemaker Boeing, CFM, and Southwest Airlines are due at the hearing.

The companies did not immediately respond to requests for comment.

The hearing comes as Indonesian authorities investigate last month’s deadly Lion Air crash involving a newer version of Boeing’s best-selling single-aisle aircraft, the 737 MAX.

(Reporting by Eric M. Johnson in Seattle)

Image from www.boeing.com