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Scheduling issues

The Boeing’s 737MAX is the most significant grounding of an airliner for decades. Alan Dron looks at the impact to airlines
 

Unlike previous airliner groundings, such as the Boeing 787 grounding in 2013 (due to battery fires), the MAX episode has been notable for the US regulator, The Federal Aviation Administration (FAA) also being in the crosshairs for allegedly granting too much autonomy to Boeing in certification of the model.

 

Such matters will be closely examined by enquiries in the coming months. However, much more pressing for airlines is the problem of fulfilling their schedules. That has led to a variety of solutions being implemented, as Philip Seymour, President and CEO of aviation consultancy IBA Group tells this publication. He says that much depended on whether an airline was already operating MAXs that had been forced to keep on the ground (such as European leisure operator TUI), or whether it had not received the aircraft that it had been anticipating, such as Ryanair, which has ordered its own specialised variant of the MAX 8 – the MAX 200.

 

“Clearly, it’s probably easier for the latter [category of airline] to deal with it because it’s not like they are losing capacity instantly,” Seymour tells. “But the way we look at it is, if you’re coming into the European summer season with the MAX (already delivered) and they’re grounded, you’re faced with some significant issues.”

 

If airlines had been planning to return leased aircraft in order to replace them with MAXs, they may have been able to extend the leases, he states. “But that’s not always an easy option, because the lessor may have promised the aircraft to its next operator.

 

“We know airlines that have less capacity that have either taken an additional dry lease at short notice and had to pay a premium or have gone down the ACMI route.”

 

One airline that has been significantly affected by the MAX grounding is Air Canada, which had 24 of the aircraft on strength – a substantial percentage of its total fleet of 192 aircraft. That is a larger proportion than some of the large US carriers such as Southwest, which have more MAXs (30-plus) than Air Canada, but a fleet around 700 strong; the MAXs thus account for a much smaller proportion of the carrier’s capacity. (The figure for Air Canada’s total fleet given here does not include aircraft belonging to the company’s regional partners or its low-cost Rouge subsidiary).

 

“This is hypothetical, but if they were flying a route four times daily with the MAX, they may have been able to put a 767 from Rouge or a 777 on the route,” Seymour mentions. “Air Canada was known to have leased several replacement aircraft from Qatar Airways,” he adds.

 

John Mowry, Managing Director of US-based Alton Aviation Consultancy, says his understanding was that Southwest had mitigated its problem by both delaying the planned retirement of older 737s and by adjusting its schedules.

 

Boeing, of course, faces significant financial costs, as airlines claim compensation for either grounded aircraft or non-delivery of expected MAXs. The US manufacturer said over the summer that it was putting aside $4.9 billion to handle anticipated costs.

 

Apart from any compensation claims, there are two imponderables facing the US aircraft manufacturer: will the negative publicity surrounding the MAX lead to airlines cancelling orders; and will passengers be reluctant to fly on the aircraft even after it is cleared to re-enter service.

 

In a blog post, OAG Senior Analyst John Grant said the commercial damage for airline operators appears to be increasing as the loss of capacity is now at its highest during the peak summer season for many operators.

 

As Grant observes, the introduction of the winter schedules for many airlines in the last week of October normally results in a slight seasonal reduction in capacity, at least until early in the new year. “Just as importantly that date is a key planning milestone for many carriers and at the moment a number of airlines continue to show 737 MAX services from the end of October as they are yet to finalise and adjust their schedules.”

 

Grant also said several airlines’ contingency plans would already have been put in place and a realistic return to service of the aircraft by that date as speculation continues on when the aircraft will be able to re-enter commercial operations. “Of course, for the airlines in any subsequent compensation, claim publishing scheduled services from November onwards certainly don’t harm their case.”

 

So far, the only tangible sign of discomfort from airlines has come from Saudi Arabian low cost carrier flyadeal, which ordered 30 MAX, plus 20 options, in December 2018. At the Saudi airshow, just days after the Ethiopian Airlines crash, flyadeal CEO Con Korfiatis said that the airline would wait and see how the situation played out, but in July it placed an order for 30 Airbus A320neo plus 20 options. The carrier has declined to say if the MAX order has been cancelled, but there seems little doubt that it will be.

 

Seymour believes it would be a case of ‘wait and see’ as to whether other MAX customers would follow suit, while Mowry doubts there would be cancellations ‘in any meaningful sense.’ While it was ‘conceivable that one or two may fall away,’ the market for the type was so large and so many carriers had ordered the MAX that it was unlikely Boeing would suffer too badly.

 

However, some airline bosses – notably the outspoken Akbar Al Baker of Qatar Airways – have argued that Boeing should rename the aircraft, as the MAX brand is now tainted.

 

Ryanair is one company whose future growth is directly affected by the MAX situation. In July, CEO Michael O’Leary said that it did not expect to start receiving its MAX 200s until January or February 2020.

“Since Ryanair can only take delivery of between six to eight new aircraft each month, we are now planning our summer 2020 schedules based on taking up to 30 737 MAX aircraft deliveries up to end of May 2020.” It had planned to have 58 on strength for its summer 2020 schedules.

This reduction means that Ryanair’s summer 2020 growth rate will drop from 7% to 3%. This will result in redundancies and base closures, said O’Leary.

It is difficult to believe that Ryanair will be the only carrier to experience such problems. The effects of the MAX’s grounding may rumble on for some time to come.


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