After more than six months of 737MAX ban, his return to service is still not resolved. The more time passes and the more damage Boeing suffers. We can now say for sure that the return to the situation before the two accidents is impossible. At the time of the flight ban, the MAX’s order book was over 4,600 units. Boeing will never deliver all these aircraft.
In the first weeks of the 737MAX crisis, Boeing was working on a quick return to service. By the end of May, the manufacturer was even promising its customers a return in July.
Then in early July, new requests from the FAA postponed recertification of the MAX in the last quarter of 2019. At the time of writing, Boeing had still not submitted to the FAA its latest changes. The possibility of a return flight in 2019 is now virtually nil.
Boeing has not yet started working on the additional requirements of Transport Canada and EASA, among others. The return to service of the 737MAX elsewhere than in the United States is therefore not feasible for the month of January 2020 either. Since the beginning of this crisis, Boeing has made promises but does not keep them. Even worse, it does not take the necessary steps to meet the new requirements from certification agencies. Boeing’s chronic inability to fulfill its promises is extremely frustrating for airlines.
Airlines can not continue to plan from quarter to quarter. In the fall of 2019, they are already planning the upcoming summer season. Boeing’s lack of credibility forces them to evaluate alternative scenarios. Somewhere in early 2020, they will have to make difficult choices. It is therefore possible that starting in January, the airlines will exclude the 737MAX from their fleet for a period of six months or even more.
When Boeing customers ordered MAXs, the economy and the airline industry were growing well. But the situation has started to deteriorate since and everything indicates that there will be a recession in 2020. Already several airlines in Europe have gone bankrupt since the beginning of 2019. And Norwegian, the second largest customer of the MAX in Europe, has doubtful finances.
Some airlines have a cancellation clause in case of late delivery in their contract binding them to Boeing. It is from the first of October 2019 that this clause can be used. It would be very surprising if there were massive cancellations, but it could be damaging even if there were only a few.
Almost 40% of the 737MAXs that have been assembled and then stored belong to leasing companies. However, a number of his aircraft are still not rented. When the MAX returns to service, it will be necessary to find them customers. If, in the meantime, Boeing should have received order cancellations, it will then compete with the leasing companies to lease them.
The Cornelian dilemma
Despite the flight ban, Boeing maintains production of the 737MAX at 42 per month. With aircraft produced before the flight ban, there are more than 600 MAXs lying on the ground. But in the coming weeks, Boeing will have to evaluate what is the worst scenario: maintain production or stop it? Both choices will have important consequences and the decision will be extremely difficult to make.
Maintaining production means that there will be more than 850 aircraft to fly, of which nearly 500 will be new. This is an important inventory to support and it will take more than a year, even two before they are all delivered. If there were to be further delays in the recertification, the situation would become unbearable for Boeing.
Stopping production means thousands of workers are laid off from Boeing and its suppliers. This is obviously the scenario that will cause the most disruption but which however has the least risk for Boeing. Add to that the presidential elections of 2020 and you have an explosive situation.
After more then six months of MAX ban, Boeing ventures into unknown territory. What was unthinkable just six months ago is now. In the coming months we are likely to witness a paradigm shift that will affect the entire aerospace industry. For example: what is the value of a used 737MAX? Nobody knows or can do an assessment. What will be the reaction of the public when the MAX will fly again?
Imagine!… In this post we did not even touch on the issue of certification agencies. We must now begin to imagine the unimaginable, think of the unthinkable and predict the unpredictable.>>> Follow us on Facebook and Twitter