Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Costs pile up for airlines as Boeing 737 Max grounding enters eighth month

Costs pile up for airlines as Boeing 737 Max grounding enters eighth month

Airlines continue to delay when they plan to have the planes back again with no sign from regulators on when the planes will be approved again.
Costs are piling up for airlines as the 737 Max heads into its eighth month.

The planes have been grounded since mid-March after two crashes killed 346 people.

Boeing’s board stripped CEO Dennis Muilenburg of his chairman role so he can focus on getting the planes back.

The worldwide grounding of the Boeing 737 Max, now in its eighth month, is driving up costs for airlines as they cancel thousands more flights into 2020.

American and United this week joined Southwest in removing the planes, grounded since mid-March after two fatal crashes killed 346 people, from their schedules until January.

Boeing executives have said they expect aviation regulators to clear its best-selling plane to fly again in the fourth quarter, but the Federal Aviation Administration said it has no firm timeline for lifting the grounding.

That has forced airlines to repeatedly push back when they expect the planes to return to their fleets. The resulting lost revenue is denting airline profits and dashing their growth plans. The capacity constraints are also becoming a bigger headache for travelers, which in addition to facing canceled flights, are getting bumped more frequently.

The impact is becoming more pronounced as the grounding continues longer than expected. Airlines not only lack access to the more than 370 Max jets that were in fleets worldwide at the time of the grounding but also the hundreds more they expected Boeing to deliver this year. The fuel-efficient planes are a key part of these airlines’ growth strategies.

American Airlines on Wednesday said it canceled 9,475 flights in the third quarter because of the grounding order, which hit its pre-tax income by about $140 million. It expects to cancel 140 flights a day until it expects the planes to return, which would mean more than 14,000 cancellations in the fourth quarter and early January.

American reports earnings on Oct. 24. The airline had 24 of the 737 Max jets in its fleet at the time of the grounding and has 76 more on order.

Airlines are canceling flights ahead of time to avoid having to give complementary last-minute, alternative flights, trips that fetch a premium.

“That’s a close-in fare that another passenger is not paying,” said Credit Suisse airline analyst Jose Caiado. “I think they explicitly want to avoid doing that around Christmas and New Year’s.”

Airlines are trying to use similar or larger aircraft to rebook travelers and limit disruptions.

Even if regulators deem the planes airworthy again, airlines need at least a month to train pilots and perform maintenance work on the planes before passengers can fly them.

Boeing took a $4.9 billion after-tax charge in the second quarter to cover compensation to airlines affected by the grounding. It has developed software fixes for the 737 Max after crash investigators implicated an anti-stall system that misfired, repeatedly pushing the nose of the planes down in both disasters ⁠- a Lion Air flight in October 2018 and an Ethiopian Airlines 737 Max in March ⁠— but it hasn’t yet handed it over to regulators for review.

American’s CEO Doug Parker said the carrier has had conversations with Boeing but doesn’t have a firm number compensation figure yet.

“It’s hard until we know when the airplane is really going to be back in service to ascertain what the damages are,” he said in an interview.

On Friday, Boeing said its board stripped CEO Dennis Muilenburg of his chairman role so he can focus on getting the Max back to service.

The rising costs don’t only apply to airlines with Max planes in their fleets. Delta Air Lines doesn’t have any Maxes and it won market share from airlines hamstrung by the grounding. In “the second quarter as well as the third quarter, we certainly were a beneficiary of the MAX not operating,′ CEO Ed Bastian said on an earnings call Thursday. That, along with higher travel demand in general spurred more flying, driving up its non-fuel costs, mainly in employee wages. The airline said it plans to hire 12,000 workers, including more pilots and flight attendants, through the end of next year.

When the Max returns, it may not be all good news for U.S. carriers, whose stock is already underperforming the broader market.

That added capacity could drive down fares, said Credit Suisse’s Caiado.
AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
Hungary Ranked Among the World’s Safest Travel Destinations for 2025
G7 Leaders Fail to Reach Consensus on Key Global Issues
FBI and Senate Investigate Allegations of Chinese Plot to Influence the 2020 Election in Biden’s Favor Using Fake U.S. Driver’s Licenses
Trump Demands Iran's Unconditional Surrender Amid Escalating Conflict
Shock Within Iran’s Leadership: Khamenei’s Failed Plan to Launch 1,000 Missiles Against Israel
Wreck of $17 Billion San José Galleon Identified Off Colombia After 300 Years
Man Convicted of Fraud After Booking Over 120 Free Flights Posing as Flight Attendant
Iran Launches Extensive Missile Attack on Israel Following Israeli Strikes on Nuclear Sites
Beata Thunberg Rebrands as Beata Ernman Amidst Sister's Activism Controversy
Hungarian Parliament Approves Citizenship Suspension Law
Prime Minister Orbán Criticizes EU's Ukraine Accession Plans
Hungarian Delicacies Introduced to Japanese Market
Hungary's Industrial Output Rises Amid Battery Sector Slump
President Sulyok Celebrates 15 Years of Hungarian Unity Efforts
Hungary's Szeleczki Shines at World Judo Championships
Visegrád Construction Trends Diverge as Hungary Lags
Hungary Hosts National Quantum Technology Workshop
Hungarian Animation Featured at Annecy Festival
Israel Issues Ultimatum to Iran Over Potential Retaliation and Nuclear Facilities
UK and EU Reach New Economic Agreement
Coinbase CEO Warns Bitcoin Could Supplant US Dollar Amid Mounting National Debt
Trump to Iran: Make a Deal — Sign or Die
Operation "Like a Lion": Israel Strikes Iran in Unprecedented Offensive
Israel Launches 'Operation Rising Lion' Targeting Iranian Nuclear and Military Sites
UK and EU Reach Agreement on Gibraltar's Schengen Integration
Israeli Finance Minister Imposes Banking Penalties on Palestinians
U.S. Inflation Rises to 2.4% in May Amid Trade Tensions
Trump's Policies Prompt Decline in Chinese Student Enrollment in U.S.
Global Oceans Near Record Temperatures as CO₂ Levels Climb
Trump Announces U.S.-China Trade Deal Covering Rare Earths
Smuggled U.S. Fuel Funds Mexican Cartels Amid Crackdown
Austrian School Shooting Leaves Nine Dead in Graz
Bezos's Lavish Venice Wedding Sparks Local Protests
Europe Prepares for Historic Lunar Rover Landing
Italian Parents Seek Therapy Amid Lengthy School Holidays
British Fishing Vessel Seized by France Fined €30,000
Dutch Government Collapses Amid Migration Policy Dispute
UK Commits to 3.5% GDP Defence Spending Under NATO Pressure
Germany Moves to Expedite Migrant Deportations
US Urges UK to Raise Defence Spending to 5% of GDP
Israeli Forces Intercept Gaza-Bound Aid Vessel Carrying Greta Thunberg
IMF Warns of Severe Global Trade War Impacts on Emerging Markets
Low Turnout Jeopardizes Italy's Citizenship Reform Referendum
Transatlantic Interest Rate Divergence Widens as Trump Pressures Powell
EU Lawmaker Calls for Broader Exemptions in Supply Chain Legislation
France's Defense Spending Plans Threatened by High National Debt
European Small-Cap Stocks Outperform U.S. Rivals Amid Growth Revival
Switzerland Proposes $26 Billion Capital Increase for UBS
×