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Boeing 737 MAX grounding: Still no end in sight

The extended Boeing 737 MAX controversy has had adverse effects on the global aviation industry, and the fallout has been great.

The 737 MAX has been grounded for nearly 6 months now There is no clear date for its return to the skies, with estimates pointing at a November-December release, even potentially Q1 2020 S & P is calling it the "worst disaster in the history" of aviation insurance

The troubled Boeing 737 MAX has been grounded for nearly 6 months now, after two separate jets were involved in 2 crashes that resulted in the deaths of 347 people. Boeing’s planes have been grounded since, and the financial, reputational and overall corprate fallout has been great. 

Massive fallout

From a financial perspective, many international airlines are vocally discontent with the fact they they’ve had to ground some of their fleet, disrupting their routes and business in return. Some, like Oman Air, have warned that they would turn to competitor Airbus if Boeing “did not provide support and recovery for the MAX,” as per Reuters. 

Others, like American Airlines, have “struggled with flight cancellations and delays this summer amid the long grounding of the Boeing 737 Max and a protracted labor dispute with its mechanics,” CNBC reports. It has had to cancel thousands of flights, eventually seeing its stock drop 16% this year. 

To make matters worse, the controversy has been been so high-profile and extended that airlines like US-based United are offering passengers to rebook and switch planes if they decide they’re not content flying on the 737 MAX, at no extra charge. They are joined by airlines like Delta in this decision. 

Local impact

Regionally, the airline to be most impacted has been low-cost carrier (LCC) flydubai, which has the world’s 2nd largest order backlog of 737 MAX’s, worth $27 billion at list prices. The airline has 11 Boeing 737 Max 8 and 2 Boeing 737 Max 9 in its fleet, all of which have been grounded. 

Unlike United, Delta and other airlines that have begun accepting bookings on 737 MAX jets ahead of their ungrounding, flydubai has remained adamant in that it will not put passengers on those planes at this time. 

“The Boeing 737 MAX 8 and 9 aircraft have been removed from our published schedule since March 2019 and will not rejoin the operational schedule until regulatory approval has been received from the General Civil Aviation Authority (GCAA),” a spokesperson for the Dubai airline told The National.

In the rest of the Middle East, 737 MAX fallout has been weatherable for the most part. 

Elsewhere, Boeing has been making some reconciliatory progress. The 737 MAX turmoil did indirectly cause Boeing to lose a $5.9 billion order from Saudi LCC flyadeal, which opted for Airbus in favor of accelerated deliverabality. 

In June, International Airlines Group (IAG), which owns airlines such as British Airways, signed a letter of intent with Boeing for 200 737 MAX aircraft. The deal would be worth $24 billion, as per list prices, with delivery expected between 2023 and 2027.

Europe’s aviation regulator won’t take the FAA’s word on the MAX’s safety

The crashes are believed to have occurred due to an issue with the MAX planes’ MCAS system, a flight-control software that is responsible for support in the balancing of the plane’s jet nose. Boeing has supposedly completed a fix, but has yet to announce that it has submitted it to the US Federal Aviation Association for revision and approval.

However, it seems FAA approval might not be enough to secure its return to the skies. 

The European Aviation Safety Agency (EASAa), the FAA’s European counterpart, said it will run its own tests on the plane before approving a return to commercial flights, a report by the BBC revealed. This information comes from a letter sent by Easa on April 1st, where EASA told the US Federal Aviation Administration (FAA) there would be “no delegation” on safety approval. 

Furthermore, the BBC explained that Patrick Ky, EASA’s chief executive, revealed a list of four conditions given to the US authorities in a presentation to the European Parliament’s committee on transport and tourism on Monday.

These conditions are: 

1. The aforementioned refusal to accept delegation on safety approval;

2. An “additional and broader independent design review” by EASA;

3. That the two fatal crashes were “deemed sufficiently understood;”

4. And that flight crews had been adequately trained in any changes to the plane. 

“Worst disaster in the history” of aviation insurance

The insurance payout on the 737 MAX aircraft will likely be the biggest ever, S&P Global Ratings said Tuesday, according to AFP.

Marc-Philippe Juilliard, a directer with S&P, told a press conference the twin crashes and the subsequent global grounding of the aircraft since March amounted to the “worst disaster in the history” of aviation insurance.

Besides the accidents, insurers and re-insurers must also cover the costs of grounding the aircraft which will rise the longer it lasts, Juillard said, adding that it was “too early” to estimate the eventual payout.

Boeing has said that so far, total costs come to about $8 billion, including a charge of $5.6 billion to cover possible airline compensation claims. 

It still seems unclear when the MAX can return to the skies. Industry members and experts seem to point to a mid-November to December time frame. With the MCAS fix not yet submitted, and with multiple regulators having to give final approval, this matter could very well cross unresolved into 2020.