Boeing 737 Max prepares for long-term recovery

Must read

Ryanair CEO Michael O’Leary loves superlatives, so there was no shortage of them when he placed a $ 7 billion order for 75 of Boeing’s 737 Maxs last week.

“It’s not just a safe plane. . . It is the safest, most audited and most regulated aircraft ever delivered in the history of civil aviation, ”he said, signing the largest firm order for the passenger aircraft. badly starred since being immobilized after two fatal accidents 20 months ago.

The deal was not the only good news for Boeing, whose credibility is on the line after the failures of the Max program that resulted in the deaths of 346 people.

Safety regulators in the United States have begun issuing the first certificates of airworthiness to individual aircraft, launching what is expected to be a return to regular service of more than 800 passenger jets that had been parked since authorities banned Sky Max in March 2019.

Gol, the Brazilian airline, told the Financial Times that a “very important step” had been taken as it became the first airline to resume commercial flights of the 737 Max on Wednesday.

The return of the Max not only begins to close a difficult chapter in Boeing’s history, but it revives competition in the hottest segment of the aviation market. Boeing’s European rival Airbus has been virtually undisputed in the single-aisle aircraft market since the Max was grounded.

“It’s important to the industry,” said Aengus Kelly, managing director of one of the world’s largest aircraft buyers, the leasing company AerCap. “We have to have competition. We cannot have a situation where one manufacturer has such market share that the other is irrelevant. “

The aerospace supply chain is also hoping for a boost from the refit of the Max, a major cash generator for many companies.

Clouds on the horizon

But the return to service of the Max and Ryanair order is just the start of a long journey for Boeing and for the industry in general, struggling to weather one of the worst aviation crises of modern times.

While major carriers such as American Airlines are also expected to start carrying passengers on the Max this month, it will be some time before this translates into a flood of new orders from a gearing up global airline industry. to net losses of $ 118 billion this year and nearly $ 40 billion in 2021.

Since the Max was grounded, orders for around 1,000 passenger planes have been canceled or deemed too risky to be included in Boeing’s order book of around 3,300 planes.

Brazilian airline Gol resumed flights of the Boeing 737 Max on Wednesday © Nelson Almeida / AFP / Getty

Even if passenger traffic begins to pick up next year after vaccine breakthroughs, airlines will face debt incurred during the crisis before they start buying wholesale.

In addition, leasing companies, which accounted for around 40% of all aircraft purchases before the crisis, have little incentive to buy the Max directly from Boeing as airlines desperately seek to raise cash by selling and then by renting jets.

“We are paying the airlines less than we would for the plane we canceled. It’s the airline that takes the haircut, ”a top 10 donor told the Financial Times.

A flawless return to school

In the meantime, Boeing’s priority is to restore passenger confidence through a fault-free return to service of the Max. The pace of return will be measured and Boeing employees will be on hand to prepare even aircraft owned by airlines for commercial service.

“Boeing will really want to be a part of this process because they can’t afford to have problems,” said Phil Seymour, president of IBA, the aviation advisory board. “Even something that is not tragic will be broadcast on social media.”

Boeing predicts that it will take about two years to clean up the 450 single-aisle jets it has been unable to deliver in the past 20 months. 387 others are installed in airline hangars and will also have to undergo major work.

Each of these jets will need to be removed from storage, updated with new software to correct the malfunction that caused the crashes, and checked for any deterioration caused by months of downtime.

Components of aircraft stored in coastal areas may have suffered from corrosion from sea air, for example, while aircraft housed in dry climates such as deserts may have sand or sand problems.

Aircraft fuselages destined for Boeing’s 737 Max production plant are in storage © Nick Oxford / Reuters

United Airlines, which has 15 Max planes in its fleet, estimates that it takes more than 1,000 man-hours to prepare a single plane for commercial use.

Finally, every aircraft will need to be inspected by safety regulators because Boeing lost the right to self-certification after revelations it misled regulators about the Max. This right can eventually be restored, if regulators have confidence in Boeing’s processes.

Playing catch-up with Airbus

The return of the Max will also affect Airbus, which has seen its share of the popular single-aisle segment increase by 60%.

Even before the Max came to a standstill, Airbus was regaining control of its A320neo and A321 family of narrow-body aircraft at a faster rate than the 737 Max.

Now the shadow of a price war hangs over the industry as Boeing seeks to find homes for orphan planes sitting in its hangars and avoid further cancellations.

Boeing and Airbus insist they will not be dragged into one. But industry executives talk about hearing about a deal at just $ 35 million for a 737 Max, down from a list price of $ 121.6 million and a more normal average selling price of about $ 60 million.

Industry executives say Boeing must try to close the chasm that has formed with Airbus. It’s not just about the success of the Max program – the reputation and future of the company as a manufacturer of commercial aircraft is at stake.

“At a minimum, they have to defend themselves and do whatever it takes to defend themselves because Airbus has had no competition for the past two years,” Kelly said.

“Airlines make a decision on a narrow-body plane every 20 years. This makes it very difficult to regain market share. If you lose a customer, the next opportunity to turn them over is in 15 to 20 years. “

Net income bar chart, past 12 months (in billions of dollars) showing Boeing profits affected by 737 Max fallout

Some analysts are pessimistic that Boeing will be able to close the gap. Customers are not only looking for more capacity in their single-aisle planes, but also narrow-body planes with the more expensive widebody lineup to help reduce operating costs. The Airbus A321 – a larger, longer-range derivative of the A320neo – is better suited than the Max, analysts say.

“Is Boeing ever going to catch up? No, ”said Ron Epstein, aerospace analyst at Bank of America. “While they were repairing the Max, their competitor was putting the finishing touches on the 321XLR, a high-performance, long-range narrow-body aircraft. It performs better than anything Boeing has. ”

Boeing’s response to the A321 is the larger Max 10 – which is slated to enter service in 2022. But with a shorter range than the latest A321 variants, it’s seen by many to be less capable.

As for the core of Boeing’s short-haul offering, the 170 to 190-seat Max 8 jet is “a wonderful aircraft for what it does, but it’s an aircraft,” said Mr. Epstein.

The danger of doing nothing

Boeing is under no illusions about the challenges but remains loyal to its Max family. “We have the utmost confidence in this product,” Boeing President and CEO Dave Calhoun said last week upon signing the Ryanair order.

The American company is betting that even before a significant recovery in passenger traffic, airlines already operating older 737s will want to replace them with the greener Max 8.

“You can take any airline in the world and they pulled their old 737s out earlier than expected,” Boeing spokesman Gordon Johndroe said. “These airlines will need planes to replace retired jets and for eventual growth. They want the Max because it’s cheaper to operate and helps airlines meet their sustainability goals. “

But there are those who believe there will be no change in the competitive landscape without a new single-aisle aircraft to take on the A321.

“We are grappling with a tectonic shift in market share if Boeing does nothing,” said Richard Aboulafia, vice president of Teal Group, the aerospace consultancy. “The A321 is not the optimal version. Her main virtue is that she is alone.

Yet with more than $ 60 billion in debt and any lasting increases in Max’s cash flow two years from now, Boeing executives are reluctant to take another bet that could cost the company dearly.

The site of the Ethiopian Airlines Boeing 737 Max crash in March 2019 © Michael Tewelde / AFP / Getty

Engine technology is not at a stage where a new aircraft can claim a sea change in fuel economy. And it is to be feared that any discussion of a new aircraft could jeopardize the success of the Max, now closely linked to that of Boeing. “If Boeing announced a new single-aisle aircraft in the next two or three years, no one would buy the Max,” said a Boeing customer.

Boeing is expected to try to delay a new plane for as long as possible, to allow technology and time to erase memories of the Max crisis. In the meantime, he will survey customers to find out their needs when the market finally recovers from the pandemic.

“If anyone thinks they know what the market will look like and what airline customers want in a few years, they don’t know what they’re talking about,” a Boeing executive said. “Research continues, but we really need to get over the pandemic before making any definitive claims.”

Additional reporting by Bryan Harris in São Paulo and Claire Bushey in Chicago

- Advertisement -spot_img

More articles

- Advertisement -spot_img

Latest article