Boeing MAX grounding could slip past August, extending flight cancellations
It could take regulators several more months to clear Boeing’s 737 Max fleet for use again, calling into question whether U.S. carriers will need to extend the potential for flight disruptions past the current August timeline.
The Federal Aviation Administration held a meeting with global regulators earlier this month to discuss the status of Boeing’s software fix for the beleaguered jet, as well as the subsequent pilot training the Chicago-based manufacturer is crafting.
A timeline for the fleet to return to service was not discussed, however, and top officials declined to provide estimates for when the grounding would lift.
"We're making clear and steady progress, and that includes the work that we're doing on the airplane update, the software update, working through the certification process with the FAA headed towards our certification flight," Boeing CEO Dennis Muilenburg said on Wednesday.
But the leader of one of the industry’s main advocacy groups is warning that the Max could be out-of-service for at least another two months.
General Alexandre de Juniac, who heads the International Air Transport Association (IATA), also urged the FAA and foreign regulators to work closely on approval timelines.
“We have to maintain an alignment between those authorities. Hopefully an alignment in terms of schedule,” de Juniac told reporters on Tuesday, according to the Wall Street Journal.
The IATA, which represents 290 airlines across the globe, does not have an exact estimate of the financial damage caused as a result of the grounding, imposed earlier this year after two crashes involving the Max fleet.
The halt in operations is costing carriers millions of dollars. Companies including American Airlines, United Air Lines and Southwest Airlines have all extended the potential for flight disruptions through early August.
But even if the jet is approved for flight by that timeline, it will take airlines roughly a month to get the fleet back into service, according to company executives.
“The aircraft will need software upgrades as well as make-ready-to-fly work, and that includes things like unsealing the aircraft, oil and fluid checks, required inspections, system checks, cabin cleaning, those types of things,” Southwest CEO Gary Kelly told investors in April. “There will also be additional FAA pilot training requirements that will also need to be completed.”
Such a scenario means cancellations would extend through the entire summer travel season, the busiest few months for most carriers. An estimated 16.5 million passengers flew during the Labor Day weekend last year, a 3.5 percent year-over-year increase. With airline travel on the rise, that number could increase in 2019.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| BA | THE BOEING CO. | 155.44 | +3.04 | +1.99% |
| LUV | SOUTHWEST AIRLINES CO. | 32.36 | 0.00 | 0.00% |
| AAL | AMERICAN AIRLINES GROUP INC. | 14.52 | -0.12 | -0.82% |
| UAL | UNITED AIRLINES HOLDINGS INC. | 96.83 | +0.48 | +0.50% |
Despite the potential delay in returning the Max to service, analysts remain confident in the outlook for Boeing.
The attendance at the FAA meeting of roughly 60 global representatives from over 30 countries indicates “a degree of collaboration amongst the parties on sharing information and moving towards a return-to-service,” Morgan Stanley analyst Rajeev Lalwani wrote in a recent note.
Cowen analyst Cai von Rumohr said the approval timeline is uncertain but "seems possible in late June although probably not sooner."
"Bottom line, U.S. flights are unlikely to resume before the indicated August dates," he wrote in a note on Tuesday.
While the grounding has led to a halt in new orders for the Max, customer interest could heighten if airlines "receive price concessions" and if the company can "bolster public confidence in airworthiness" of the existing orders.
Boeing previously cut its production of new Max jets to 42 per month, but the firm expects production to ramp up again after the fleet returns to service.
One lingering question is how Boeing will seek to remedy the money that airlines lost due to the Max grounding. "Cash may be part of the solution," said Muilenburg, adding that there could be "other currencies that we can trade with customers," including servicing and training support.
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Among the factors elongating the FAA’s review is a request for further information from Boeing, according to the company.
“Once we have addressed the information requests from the FAA, we will be ready to schedule a certification test flight and submit final certification documentation,” Boeing wrote in a statement.
In addition to the FAA's independent review of its certification process for new jets, Boeing also launched a new board committee to review its internal processes, Muilenburg said.