- This is the first client Boeing lost after its Max aircraft fleet’s worldwide grounding in less than a year after two deadly accidents.
- The total revenue airlines are losing per day for all the 737 MAX aircraft that are now grounded could be close to US$60m
Airlines around the globe have stopped Boeing’s 737 MAX fleet. First commercially launched in 2017, the 737 MAX is the fourth generation of the 737 family of Boeing and in the early years of service, it is not uncommon for fresh aircraft to go through technical problems. In the past, both Airbus ‘ A380 airliner and Boeing’s Dreamliner were stopped owing to technical problems (in 2010 the A380 had engine problems and in 2014 the Dreamliner had battery problems). But on several fronts, the present scenario is distinct and could prove expensive for Boeing.
However, 157 individuals were murdered by the crash of Ethiopians Airlines Flight 302, which caused the grounding of 737 MAX aircraft around the globe. 189 individuals were murdered by the Lion Air 737 MAX that collapsed in October 2018 and reported to have comparable problems to the tragedy of Ethiopian Airlines.
The software of Boeing and the integrated flight control function that researchers believe triggered the two deadly accidents are now being asked severe questions. For this, Boeing has pledged a software fix, but its roll-out is postponed and carriers around the globe keep their 737 MAX aircraft grounded.
What is the potential for loss of revenue and additional costs incurred when an aircraft is grounded?
Direct costs that are not absorbed are as follows:
- Staff costs: Type-specific flight and cabin crews cannot be transmitted to another sort. Using a crude order of numbers of size. This could amount to $5,000 per day for 2 flight crew and 4 cabin crew.
- Leasing/finance costs: A typical monthly lease of $360,000 implies that $12,000 is wasted every day. Airlines must cover the cost of leasing/financing regardless of whether or not the airplane is flying.
- Parking fees: Airports (especially significant airports in the town) can be very costly aircraft parking spaces. We’re going to use a typical $5,000 per day payment.
- Passenger re-routing/compensation: k). We will suppose 6 flights per day at a load factor of 90% @ 180 pax max for the purpose of this practice. This can be a nightmare to organize and highly expensive for an airline/tour operator. Options can include simply canceling flights and repaying income, organizing alternative flights through wet leasing. For some Airlines that have heavy load factors and want to provide their faithful clients’ continuity, wet short-term lending may be a favored alternative.
Large airlines with some excess capacity may be prepared to offer solutions from their own fleets, other airlines will be less versatile because they will not have such capability. We estimate that the cost to 1,000 travelers per day is in the order of disturbance to be an average of USD 100 per pax, totaling $ 100,000 per day.
The total revenue airlines are losing per day for all the 737 MAX aircraft that are now grounded could be close to US$60m.
The figure of US$ 60 m above should be regarded with caution, of course. Extrapolating the numbers for the US industry to calculate a number for the remainder of the globe may not be completely suitable, and at best one-fifth of the above sum is profit. Nevertheless, we can readily foresee Boeing facing aviation proceedings of hundreds of millions of USD if the aircraft stay grounded for any lengthy span of a moment. There is no international convention to restrict the quantity of liability that can be faced by aircraft manufacturers if they are discovered to be responsible.
Hundreds of millions of bucks may seem like a manageable quantity for a business that in 2018 alone made a profit of US$ 10.5 billion. But Boeing’s long-term expenses are probable to be in the billions of USD owing to the lost company. For example, the order of 50 aircraft that Indonesian airline Garuda had withdrawn was worth US$ 4.9 billion.
There is no doubt that the American producer will gain lessons from all this. The 737 MAX accidents can stay a bleak place in the past of Boeing, and a story of caution for the future. But ultimately, the lives of the 346 victims of the two recent crashes, as well as the pain and suffering inflicted on their loved ones, can not be placed at a cost.
Boeing’s 737 Max loses the first customer as Flyadeal goes to Airbus
In a media release published yesterday, Flyadeal – introduced by its parent Saudi flag airline Saudi Arabian Airlines (Saudia) on September 23, 2017 – announced an order for an additional 20 Airbus A320 Neo planes. Aircraft deliveries will begin in 2021.
Flyadeal’s distribution of the fresh aircraft is the result of the contract that Saudia agreed in June this year at the Paris Air Show, Flyadeal added. That arrangement amounted to 100 aircraft in total.
“The extra planes are component of the Saudi Arabian Airlines Corporation’s dual-brand approach where Flyadeal provides the price-conscious client seeking Everyday Low Fares,” said Flyadeal.
Last week, on the B737 Max fix, Boeing’s chief executive, Dennis Muilenburg, said his business must “take the time necessary.”
This is the first client Boeing lost after its Max aircraft fleet’s worldwide grounding in less than a year after two deadly accidents. The company went near to losing an order in March when Indonesian flag airline Garuda Indonesia said it had sent a letter to Boeing calling for the cancelation of its order for 49 Boeing 737 Max planes (one aircraft out of the order for 50 had already been supplied).
