Boeing 737 MAX grounding, an unprecedented crisis in the history of air traffic

The cost also includes the grounding of 371 aircrafts in operation worldwide, the cancellation of current orders, losses sustained by airliners affected by the cancellation of thousands of flights.

Boeing 737 MAX: Flights suspension

Following both Boeing 737 MAX disasters [4], occurring within five months and, aircraft flights of the same type have been suspended worldwide.

By April 1, 2019, American manufacturer had delivered 387 aircrafts, 371 of which are in operation.

Following the Addis Ababa accident, civil aviation authorities throughout the world, immediately decided to ground their fleets, banning, as of March 13, 2019, any flight of this aircraft from crossing their air space.

Boeing 737 MAX grounding: Impact on the manufacturer

The impact of both disasters implicating the Boeing 737 MAX were quickly felt, with the suspension by manufacturer of the delivery of the similar plane models which already accounted for 79% of the total number of aircrafts waiting to be delivered.

Over the first four months of 2019, the American manufacturer has reported a 25% decrease of its deliveries in civilian planes in addition to a 20% decline of its production.

Its 2019 order book is diminished by at least 119 aircrafts. Net orders for the 737 model amount to -171 aircrafts, that is, 25 orders and 196 cancellations ⁽¹⁾.

The manufacturer’s image has been seriously tarnished following the latest findings regarding the aircraft’s design defect. On May 18, Boeing admitted to a dysfunction of its simulator software designed to reproduce flight conditions and with which pilots get trained.

The crisis is poised to linger on, especially as the international aviation authorities, gathered on May 23, 2019 in Texas, failed to come to an agreement over the resumption of flights. For Boeing, the ordeal is far from over even if the manufacturer announced on May 12 that its 737 MAX is ready for a new certification which is normally granted on the country-per-country basis.

The manufacturer is required to not only compensate operating costs for the benefit of the 47 airline companies whose aircrafts have been grounded but also the 33 new customers for future-lost earnings. As of March 13, Boeing has failed to honor its obligations to deliver the aircrafts in time.

Orders and deliveries of Boeing 737 MAX

⁽¹⁾ www.boeing.com/company/about-bca/index.page%23/prices#/orders-deliveries

⁽¹⁾ All types of 737
⁽²⁾ All types of aircrafts manufactured by Boeing

Source: http://active.boeing.com

Boeing 737 MAX grounding: Impact on airline companies

Approximately fifty airline companies have been compelled to cancel thousands of flights, sustaining very high operating cost due to the flight ban of the Being 737 MAX. The latter can only be definitively determined after several months. This unprecedented aviation crisis is set to linger on until the end of the 2019 summer season, according to most upbeat forecasts.

American Airlines, a very important customer for Boeing and one of the hardest-hit companies, has initiated the cancellation of 1200 flights in the course of the first quarter, putting off scheduled flights for its 24 aircrafts until August 19, 2019, that is, 115 flights a day. An initial bill amounting to 350 million USD has been considered.

Southwest, an equally important customer of Boeing, is also in dire straits. The company, using 34 aircrafts and expecting the delivery of another 280, cancelled 10 000 flights in the first quarter of 2019. The carrier, whose net profits decreased by 16%, had to suspend all flights scheduled for its 737 MAX aircrafts until August 5, 2019.

The three major Chinese airline companies, with 45 aircrafts in their possession, and awaiting the delivery of another 79 planes, have been seriously affected. China Southern, China Eastern and Air China are demanding damages sustained following the grounding of their fleets and for the delayed delivery of new units.

The list of companies demanding financial redress is getting longer day after day. In addition to American and Chinese companies, Turkish Airlines, Flydubai, Norwegian, Ryanair, are submitting their bills to Boeing.

According to many experts, the compensation of affected airline companies is undoubtedly to cost Boeing several billion dollars.

Boeing 737 MAX grounding: Cost for the insurance business

At the level of the aviation insurance market, the two crashes, the Boeing 737 MAX grounding along with the delayed delivery of the aircrafts will have a huge impact, with total compensation costs expected to reach several tens of billions of USD. The businesses affected are:

• haul of the missing aircrafts,
• death-related compensations,
• operating costs for carriers,
• costs incurred for the upgrading of grounded aircrafts,
• costs related to the replacement of the grounded aircrafts,
• loss of brand image…

According to Willis Re estimates, global insurance and reinsurance leaders would be impacted by up to 171 million USD, with Swiss Re disbursing 90 million USD and Allianz 57 million USD. As for Hannover Re, the crash will trigger a net cost of 13.3 million USD.