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Boeing : under pressure amid cancelled flights

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04/16/2019 | 01:08am EDT


Boeing faces a wave of flight cancellations by US airlines and pressure from President Donald Trump to rebrand its top-selling 737 MAX aircraft, a month after the plane was grounded worldwide in the wake of two deadly crashes.

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

United Airlines said it had previously used spare aircraft and "creative solutions" to keep from having to cancel flights but cancelations in the busy summer travel season could no longer be avoided.

"No one knows when the FAA review will be complete, so we've decided to pull MAX flights out of our schedule through early July," a spokesperson told AFP on Monday.

In all, an average of 275 flights a day will be cancelled, which are likely to put a dent in airline profits and could cause the companies to raise airfares.

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 Manoeuvring Characteristics Augmentation System, or MCAS.

And Boeing, which has already ceased 737 MAX deliveries and slowed the pace of production, a build-up 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.

"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 finalising 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 the aircraft 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.

(c) 2019 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info)., source Middle East & North African Newspapers

Stocks mentioned in the article
ChangeLast1st jan.
BOEING COMPANY (THE) 0.39% 375.46 Delayed Quote.15.98%
SOUTHWEST AIRLINES 0.27% 52.93 Delayed Quote.13.88%
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Sales 2019 104 B
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Net income 2019 10 735 M
Debt 2019 5 029 M
Yield 2019 2,16%
P/E ratio 2019 20,23
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EV / Sales 2019 2,08x
EV / Sales 2020 1,81x
Capitalization 211 B
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