By David Shepardson

WASHINGTON (Reuters) -Boeing said on Wednesday it was making progress on developing a permanent solution to address an issue with the 737 MAX engine anti-ice system that has delayed certification of the smallest model, the MAX 7 and the largest, the MAX 10.

The issue with the anti-ice system could lead to it overheating and potentially causing an engine failure.

A source told Reuters that Boeing plans to conduct flight testing on the anti-ice fix later this year and said certification of the MAX 7 could slip to mid-2025.

Boeing Chief Financial Officer Brian West said in January the anti-ice fix could be addressed “within a year.” Boeing has 35 MAX 7 and MAX 10 planes in inventory.

Boeing, under scrutiny over its safety record after the mid-air blowout of a cabin panel on a MAX 9, in January withdrew a request it filed with the Federal Aviation Administration last year seeking an exemption from a safety standard for the MAX 7 over the issue, which pushed potential certification into 2025.

The Air Current, an aviation trade publication, reported earlier on Wednesday that the fix Boeing has settled on will result in delaying certification of the MAX 7 and 10 deep into 2025 at the earliest.

The FAA, which has repeatedly declined to put any timetable on approval, said on Wednesday it “will thoroughly review any design Boeing submits.”

Senator Tammy Duckworth in January had urged Boeing to abandon the exemption request, saying the issue could “cause the engine nacelle to break apart and fall off. This could generate fuselage-penetrating debris, which could endanger passengers in window seats behind the wing.”

Boeing said there have been no safety incidents observed in service stemming from overheating in the engine inlet.

The planemaker issued guidance to airlines last June to follow established procedures when using the MAX’s engine anti-ice system to address potential overheating, and the FAA last August mandated the existing procedure to turn off the engine anti-ice system when it is no longer needed.

Southwest Airlines, the MAX 7’s biggest buyer, said in January it no longer expected to take deliveries of the model this year.

Boeing has said it must first win approval from the FAA for the MAX 7 before it can get the larger, better-selling MAX 10 certified.

After its best-selling MAX family of jets resumed service following two fatal crashes in 2018 and 2019, Boeing at one point forecast it would win certification approval for the MAX 7 and MAX 10 by the end of 2022.

(Reporting by David Shepardson; Editing by Jonathan Oatis and Jamie Freed)