National Post (National Edition)
BOEING ORDER BOOK LOOKING SHAKY.
PLANES GROUNDED IN U.S. UNTIL SOFTWARE UPDATED
More troublesome signs emerged for Boeing Co.’s 737 Max as the United States appeared likely to keep the jet on ground into April, while the company said it has temporarily halted deliveries of the jetliner because of the crisis.
“We continue to build the 737 Max while we’re assessing how the situation — including any potential capacity constraints — will impact our production,” spokesman Chaz Bickers said Thursday.
Meanwhile, the aircraft’s US$600 billion-plus order book looked increasingly shaky after several big customers threatened to reconsider their purchases in the wake of the Ethiopian Airlines crash.
Vie tje t Aviation JSC, which doubled its order to about US$25 billion only last month, said it will decide on its plans once the cause of the tragedy has been found. Kenya Airways Plc is reviewing proposals to buy the Max and could switch to Airbus SE’S rival A320. Russia’s Utair Aviation PJSC is seeking guarantees before taking delivery of the first of 30 planes.
That’s as Indonesia’s Lion Air firms up moves to drop a US$22 billion order for the 737 in favor of the Airbus jet, according to a person with knowledge of the plan. Separately, Garuda Indonesia plans to cut orders of the Boeing plane and a US$5.9 billion order from a unit of Saudi Arabian Airlines hangs in the balance.
The 737, which first entered service in the late 1960s, is the aviation industry’s best-selling model and Boeing’s top earner. The re-engineered Max version has racked up more than 5,000 orders worth in excess of US$600 billion, including planes that have already been delivered.
Boeing, whose shares have lost 11 per cent of their value this week, faces escalating financial risk after two disasters involving its newest narrow-body jet in the past five months. The stock closed down less than 1 per cent at US$373.30 on Thursday in New York after seeing its biggest two-day drop on Monday and Tuesday in almost a decade.
The deadly crash in Ethiopia comes just about five months after the Oct. 29 crash of another Boeing 737 Max plane, operated by Indonesia’s Lion Air. The relationship between the carrier and Boeing soured after the manufacturer pointed to maintenance issues and human error at Lion as the underlying cause, even though the planes pilots had been battling a computerized system that took control following a sensor malfunction.
Sunday’s loss of an Ethiopian Airlines 737, in which 157 people died, bore similarities to the Asian tragedy, stoking concern that a feature meant to make the upgraded Max safer than earlier planes has actually made it harder to fly.
Boeing is in crisis as most of the world grounded the plane.
On Wednesday, U.S. and Canadian regulators joined the global chorus by grounding the plane, citing evidence showing the Ethiopian Airlines flight may have experienced the same problem as the plane that went down five months ago off Indonesia.
On Thursday, U.S. lawmakers said the 737 Max family of passenger jets could remain grounded in the U.S. at least through April.
Flights won’t resume until the planes receive updated flight control software that Boeing and the U.S. Federal Aviation Administration are racing to finalize, Pete DeFazio, the Oregon Democrat who chairs the House Transportation and Infrastructure Committee, and Missouri Republican Sam Graves, that panel’s ranking member, said after a briefing by FAA officials.
That process could last for six weeks or more depending on additional training needed for pilots, said Representative Rick Larsen, the Democratic chairman of the panel’s aviation subcommittee and whose district includes Boeing’s campus in Everett, Wash.
“I know the software fix is going out in a couple of weeks and going fleet-wide is going to take at least through April,” Larsen told reporters after he and other members of the committee were briefed by FAA Acting Administrator Daniel Elwell and others.
Cai von Rumohr, an analyst with Cowen & Co., said in a note, that “with extensive grounding of the 737 Max, near-term news could get worse for Boeing before it improves.” However, he added, because the company is readying an update to its flight-control software, “we don’t see meaningful longterm risk.”
Indeed, the only real rival to Boeing is European planemaker Airbus, whose production line for the A320neo is full well into the next decade. Alaska Air Group Inc. said Wednesday it would take delivery of its first Max aircraft.
Vietjet is monitoring the situation and will reach a decision on whether to go ahead with its purchase following “official conclusions” from global regulators and the Civil Aviation Authority of Vietnam, it said in a statement Wednesday.
Utair told RIA Novosti that it’s waiting for results of the Ethiopian crash probe before proceeding with the first delivery on an order for 30 737 Max jets. The company is seeking assurances from Boeing, it said.
Flyadeal, a unit of Saudi Arabian Airlines, said in December it would switch from Airbus and purchase up to 50 737 Max jets, subject to final terms being reached. The company says it’s waiting on the results of the investigation. “We’re closely monitoring the situation and are in constant contact with Boeing,” the company said in an email. “There are no conclusions to be drawn at this time.”
Lion Air was already looking at scrapping its Boeing deal after October’s crash, which killed 189, and the latest disaster has made cofounder Rusdi Kirana more determined to cancel the contract, according to the person familiar with the situation, who asked not to be named as the plans are private.
In Canada, Air Canada, Westjet Ltd. and Sunwing Airlines Inc. operate the model. Air Canada has operated the Boeing 737 Max 8 since 2017 and has 24 in its fleet. It has a firm order for 26 more, 18 of which it plans to add in 2019. Westjet operates 13 of the aircraft, and has ordered 37 more. It has a fleet of 121 Boeing 737s. Sunwing operates four of the jets, and has ordered three more.
When asked on Monday if the Ethiopian Airlines crash will affect their future procurement plans, both touted the safety of the aircraft.
Kenya Airways will consider switching to Airbus or could opt to take more of an the older version of the 737 Boeing jet, which doesn’t feature the suspect system, chairman Michael Joseph said in an email, without ruling out sticking with the Max. The company revived plans to expand its network last year with a proposal to buy as many as 10 of the planes worth about US$1.2 billion.
Some 32 of those killed in the Ethiopian crash, which occurred six minutes after takeoff from Addis Ababa, were Kenyan citizens, the most for any single country.
“We will carefully follow the developments around the 737 Max,” Kenya Airways’ Joseph said. “No decision has been taken yet.” Sub-saharan Africa’s third-largest carrier is almost 50-per-cent state-owned after a reorganization in 2017.
Kenya Airways has about 40 aircraft including eight 787 wide-bodies and the same number of an older version of the 737, the 800. The Dreamliner fleet will likely expand to add longhaul services, Joseph said, requiring more smaller planes to feed them with customers. Those might include turboprops and Airbus A220 or Embraer SA E2 regional jets, as well as 737-sized models.