Daily Management Review

Global Grounding Of Boeing 737 MAX Forces Airlines To Seek Alternatives And Others To Review Orders


Global Grounding Of Boeing 737 MAX Forces Airlines To Seek Alternatives And Others To Review Orders
While a number of airlines have been put in a lurch due to the grounding of Boeing’s global 737 MAX fleet because they would now have to find out alternatives to replace the crafts, there are other airlines that have not yet received the crafts now have the opportunity to re-evaluate the orders that they had placed with the US based aircraft maker.
Following the fatal crash of a 737 MAX craft of the Ethiopian Airlines last weekend killing 157 people on board, many countries and airlines across the world had grounded their fleet of 737 MAXs. Four months ago, a same model craft from Boeing, belonging to Lion Air of Indonesia, also met with a fatal crash resulting in death of all of the people on board. 
According to analysts, for those airlines who feel that they had placed more than required orders for the 737 MAX – considered to be the workhorse of airlines, the grounding of the crafts gives them an opportunity to either delay or cancel the orders which could save them money and clean their balance sheets.
“These unfortunate developments could give airlines that have potentially over-ordered an opportunity to review their requirements and fleet strategy,” CAPA Centre for Aviation Chief Analyst Brendan Sobie said.
The grounding of the 737 MAX however has forced many airlines to look for quick replacements to those crafts and this has also jeopardised plans of airlines to make use of crafts that are more fuel efficient and can fly to longer distances – thereby being able to serve new destinations.
For example, the plans of the largest operator of the MAX crafts - Southwest Airlines Co, was to use them to serve its new route from California to Hawaii later in the year. On the other hand, flights between Brazil and Orlando and Miami were started in November by Gol Linhas Aereas Inteligentes after the airlines got its first set of 737 MAX crafts from Boeing.
Typically, contracts between airlines and aircraft manufacturers include provisions for penalties in case orders are cancelled by airlines or planes are not delivered in time by makers. It is however not yet clear whether airlines would have any legal leverage over Boeing in cancellation of orders for MAX following the grounding of the entire fleet globally by the plane maker.
According to Sobie, Vietnam’s VietJet Aviation JSC is an airline that probably would regret having place more than needed Boeing’s 737 MAX because, he claimed that the airline had embarked on a faulty strategy of opening up joint ventures in foreign markets and conducting and expansion of its all-Airbus A320 fleet through including about another 200 737 MAX jets.
VietJet said that the current situation was being monitored closely and would wait for more information to take a final decision about the orders that it had already placed with Boeing for 737 MAX jets.
There are other airlines that are also reviewing their orders for 737 MAX jets with Boeing which includes Malaysia Airlines, Garuda Indonesia and Lion Air in Asia, and the likes of Norwegian in Europe,
The first major airline to publicly attach dollars and cents to the uncertainty surrounding the 737 MAX is Air Canada, which announced on Friday that it was suspending its 2019 financial forecasts.