Boeing’s 737 Max is set to return to the skies as industry reels from pandemic

first_imgIt’s been a bruising year for the company. In the first 10 months of 2020, Boeing lost 393 aircraft orders after factoring in new sales, cancellations and orders for planes that were converted to other aircraft. Chief rival Airbus won 308 net new orders for aircraft in that period, by comparison. Boeing has lost $3.45 billion this year through the end of September and analysts don’t expect it to get to positive free cash flow until the end of next year.Boeing executives, however, are eager to turn the page after the protracted crisis, and many investors appear to be, too. Boeing’s stock price has shot up more than 40% this month, fueled by optimism around the jets’ return and positive news from two vaccine trials. But the shares are still off more than 37% this year as the pandemic presents an added challenge to the plane maker.‘Finish line’Against that backdrop the Federal Aviation Administration is near “the finish line” of its review of the planes, it said last week. Other aviation authorities such as those in Europe and Brazil are likely to follow suit, ending the longest and largest grounding of a commercial aircraft. The recertification is key for Boeing because it hasn’t been able to deliver planes to customers since the grounding took effect in March 2019.- Advertisement – The Boeing 737 Max is nearing clearance to fly again after a 20-month ban prompted by two fatal crashes that sent the company into a crisis, but the planes are returning to a different problem.The coronavirus pandemic has roiled airline finances around the world, hurting demand for new planes and helping to drive up cancellations and deferrals.“The Max isn’t coming into a situation where everything is fine now,” said Phil Seymour, president of London-based aviation consulting firm IBA Group.- Advertisement – – Advertisement – A Boeing 737 MAX airplane is seen parked at a Boeing facility on August 13, 2019 in Renton, Washington.David Ryder | Getty Imagescenter_img All 346 people on board Lion Air Flight 610 on Oct. 29, 2018, and Ethiopian Airlines Flight 302 on March 10, 2019, were killed in the crashes.Pilots in both Max flights battled the planes’ automated flight-control system, which has been at the center of several investigations into the crashes. Pilots weren’t informed about the system and mentions of it had been removed from pilot manuals when they were delivered to airlines. A House investigation in September found regulatory, design and management problems as the jets were being developed led to the “preventable death” of the 346 people on board. Boeing has since made the system less aggressive and added more redundancies. FAA Administrator Steve Dickson, a former Delta pilot, tested the aircraft himself in September.Return to serviceOnce the aircraft is certified, 737 pilots will have to undergo training that will include sessions in a flight simulator, a process that could take several months to train all of an airline’s 737 flight crews. Southwest Airlines and United Airlines don’t expect to fly the planes commercially until sometime next year.Others expect it back sooner. American Airlines has scheduled the planes’ first commercial flights for Dec. 29 and is planning to allow customers to tour the planes before regular flights resume. Brazil’s Gol Linhas Aereas Inteligentes hasn’t started selling seats on the Max, but said it would fly it domestically in December, if it’s approved this week, CFO Richard Lark said in an interview. Eventually, it plans to use them to link Brazil with Florida.Gol is one of the biggest customers for the Max and has already cut 34 planes from its original order of 129 planes. Lark expressed confidence in the safety of the aircraft and in Boeing but said the pandemic may change the carrier’s needs.Additionally, it stokes concerns about the residual value of the aircraft, Lark said. Aircraft values have dropped in the pandemic, and the Max is no exception. IBA valued the 737 Max 8, the most commonly sold model, at $41 million in July, down nearly 9% from January. The Airbus A320neo, the Max’s main rival, also fell, losing close to 7% of its value to $42.5 million in that period.American has options to defer 18 of the 737 Max planes it ordered.“If [the grounding] gets lifted soon here in November, we’ll get some delivered in December,” American’s CFO, Derek Kerr, said during an industry conference last week. “There’s another 18 that come in 2021 and 2022 that we have deferral rights on those all. And we’ve said it would have to get much, much better for those to be taken. Assumptions are that they probably, over time, will be deferred.” – Advertisement –last_img

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