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MarketScreener Homepage  >  Equities  >  Euronext Paris  >  Airbus SE    AIR   NL0000235190


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Analysis: As regulators prepare to weigh in on 737 MAX, FAA's global dominance fades

11/19/2020 | 08:26am EST
FILE PHOTO: Grounded Boeing 737 MAX aircraft are seen parked at Boeing facilities at Grant County International Airport in Moses Lake

SYDNEY/MONTREAL (Reuters) - Global regulators have held off approving the Boeing 737 MAX despite a decision by the U.S. Federal Aviation Administration to end a 20-month grounding, highlighting changes in the global regulatory pecking order caused by two crashes of the jet.

In March 2019, when the second MAX crash in five months brought the death toll on the recently introduced Boeing Co model to 346 people, China quickly grounded the airliner, sparking a cascade of flight bans around the world.

The announcements from East to West highlighted China's growing clout in aerospace and global affairs.

Now, however, the ungrounding process is expected to take days, weeks or longer as foreign regulators check the FAA's homework and impose their own conditions for a return to service.

In the past, regulators promptly followed the guidance of the FAA, credited for decades with pioneering aviation safety. But many are now wary of seeming to toe the FAA line after the U.S. agency was faulted for lax oversight.

Canada and Brazil, two aircraft-producing nations with heft in the industry, are expected to back the FAA's decision within weeks. But both said on Wednesday they weren't yet ready to decide.

"I think it's causing the countries to be a little bit more critical of the type-certificate validation process," said Mike Daniel, a former FAA certification expert and accident investigator based in Singapore. "Hopefully they're a little bit more critical of what their air operators are required to do with regard to training."

The ability of regulators to co-operate is crucial in a sector spanning dozens of jurisdictions.

Having a regulator such as the FAA do the heavy lifting to certify a U.S. plane reduces costs and time, because agencies abroad can validate the results without having to duplicate them, said Teal Group analyst Richard Aboulafia.

"What the FAA does need are more resources," he said.

Emerging strengthened from the crisis, many analysts say, is the European Union Aviation Safety Agency (EASA), a direct peer to the FAA that oversees Airbus SE.

It has been closely involved in vetting the MAX changes and is expected to have greater scrutiny of future projects like Boeing's 777X, while the FAA may do likewise with Airbus jets.

The crisis has boosted EASA's influence as some agencies wait for its decision on the MAX rather than copy the FAA.

"We have been working with EASA since the early days on the issue and their position will be taken into account," a spokesman for Australia's Civil Aviation Safety Authority said.

Industry sources say EASA could issue its ungrounding order as early as next week, followed by a 30-day comment period.

But there will be some differences between what the FAA approved and what Europe and Canada will require for their airlines. Canada, one of the last major nations before the U.S. to ground the MAX, has faced criticism for shadowing its ally.


FAA chief Steve Dickson played down the differences.

"There's very little daylight" between the FAA and regulators around the world, he said, adding that the FAA had worked "arm in arm" with Europe, Canada and Brazil.

"As painful and as arduous as the process has been, it has really strengthened the cooperation between these regulators and I think it put us in a much stronger position globally for aviation safety going forward," he said. He expected other agencies to approve the MAX in a "relatively short period of time".

That still leaves unanswered questions over China's plans for approving the MAX. As the biggest operator, its decisions have an immediate impact on Boeing, and its broader airspace ban could hamper the return to service by other Asian airlines.

But as a rising aerospace power with its own commercial jet programme and ambitions to be taken seriously as a regulator, China has wider interests too, analysts say. Some do not exclude Beijing using the MAX as a political bargaining chip.

"We worry that it might be used as a tool in the escalating tensions between the U.S. and Chinese governments," Morningstar analyst Burkett Huey wrote. "That noted, we are encouraged by the coming change in the U.S. government and think the new administration may have a less combative trade policy, which we think increases the chance of Chinese recertification."

(Reporting By Jamie Freed in Sydney and Allison Lampert in Montreal; Additional reporting by Heekyong Yang in Seoul, David Shepardson in Washington and Bernadette Christina Munthe in Jakarta. Editing by Tim Hepher and Gerry Doyle)

By Jamie Freed and Allison Lampert

© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
AIRBUS SE -2.13% 90.55 Real-time Quote.3.09%
EURO / BRAZILIAN REAL (EUR/BRL) 0.04% 6.3821 Delayed Quote.-0.49%
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THE BOEING COMPANY -2.66% 204.32 Delayed Quote.-4.55%
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