Boeing Still in the Hot Seat Amongst Grounding and Trump Tweets

American and Southwest Airlines say the grounding will disrupt scheduled flights through the summer, during the peak travel season which helps generate corporate profits.

American is canceling all 737 MAX flights through August 19 while Southwest, which owns the largest 737 MAX fleet, with 34 planes, is canceling them until August 5.

United Airlines, which also ordered the 737 MAX 9, did not respond to an AFP query. In all, an average of 275 flights a day will be canceled, which are likely to put a dent in airline profits and could cause the companies to raise airfares.

UK firm sees 737 MAX crisis wiping $12 billion off #Boeing brand value https://t.co/nTgguXCGqy

— Ville Kostian (@Kostian_V) April 15, 2019

American already cut a key industry revenue metric — Total Revenue per Available Seat-Mile, or TRASM — saying it will rise one percent in 2019, down from a prior estimate of two percent.

Southwest is allowing affected passengers to reschedule flights at no additional cost. “Neither Airbus nor Boeing like cancelations and there are stiff contracts which make this very difficult,” said Scott Hamilton, managing editor of the aviation news site Leeham News and Analysis. “The companies will swap airplane types, however, if it comes to this.”

All 737 MAX aircraft have been banned from the world’s skies since mid-March after suffering two fatal crashes less than five months apart: a Lion Air flight crashed in the Java Sea in October, leaving 189 dead, and the Ethiopian Airlines crash on March 10, which killed 157 people.

Crash investigators have zeroed in on the planes’ anti-stall system, the Maneuvering Characteristics Augmentation System, or MCAS. And Boeing, which has already ceased 737 MAX deliveries and slowed the pace of production, a buildup of delays could increase the penalties it must pay client airlines, Hamilton said. Trump tweeted early Monday that Boeing had to give its scandal-stricken aircraft a new image.

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Rebuilding Trust

“What do I know about branding, maybe nothing (but I did become President!), but if I were Boeing, I would FIX the Boeing 737 MAX, add some additional great features, & REBRAND the plane with a new name,” he said. But Hamilton said Trump was right to doubt his own expertise. “Trump is a boob. Boeing isn’t going to rebrand the 737,” Hamilton said, pointing to Boeing’s log of more than 4,600 backorders, a key sales revenue driver, and adding that the order cancelations so far were “inconsequential.”

Aviation analyst Richard Aboulafia of Teal Group agreed. “Pretty much all of President Trump’s pronouncements on aviation are safely and best ignored,” he said. Boeing is finalizing software upgrades for the MCAS, which it has pledged to submit to regulators in the coming weeks so that the 737 MAX grounding order can be lifted.

“We’re focused on testing and implementing the software update and rebuilding the trust of our airline customers, pilots and the traveling public,” a spokesperson told AFP. “We know we have a deep responsibility to everyone who flies on our airplanes to ensure that the MAX is one of the safest aircraft ever to fly.”

Rebranding would impose additional costs on the airlines which would be required to fully retrain pilots. While an updated model involves less intense additional training. Flight cancelations show the airlines, that had hoped to have the planes back in the air by May, now expect it will be longer before the aircraft can return to service.

Aviation analysts largely agree and expect the grounding to be lifted by the end of August. In the meantime, the industry is working to regain the trust of the flying public.

The US Federal Aviation Administration, which must certify the 737 MAX’s airworthiness, released a video last week in which its interim chief Daniel Elwell said the agency was working to keep pilots informed. The FAA also said the agency would not rush to get the 737 MAX flying again.