Grounding costs US airlines dearly

737 MAX: BOOMING DEMAND, NOT ENOUGH AIRCRAFT

ormally, US airlines compete to sell tickets and fill seats during the peak northern hemisphere summer travel season. But operators of the grounded Boeing 737 MAX are facing a different problem: scarce planes and booming demand.

The grounding of Boeing Co’s fuel-efficient, single-aisle workhorse after two fatal crashes is biting into US airlines’ northern hemisphere spring and summer schedules, threatening to disarm them in their seasonal war for profits.

“The revenue is right in front of them. They can see it, but they can’t meet it,” said Mike Trevino, spokesperson for Southwest Airlines Pilots Association and an aviation industry veteran.

Southwest Airlines Co, the world’s largest MAX operator, and American Airlines Group Inc, with 34 and 24 MAX jetliners respectively, have removed the aircraft from their flying schedules into August.

Southwest’s decision will lead to 160 cancellations of about 4 200 daily flights between June 8 and August 5, while American’s removal through August 19 means about 115 daily cancellations, or 1.5% of its summer flying schedule each day.

Low-cost carrier Southwest which, unlike its rivals, only flies Boeing 737s, had estimated $150 million in lost revenue between February 20 and March 31 alone, due to MAX cancellations and other factors.

So far, airlines have said it is too soon to estimate the impact of the MAX grounding beyond the first quarter, but the extended cancellations signal that they do not expect a quick return of Boeing’s fast-selling jetliner.

The 737 MAX was grounded worldwide in March following a fatal Ethiopian Airlines crash just five months after a Lion Air crash in Indonesia. All on board both planes were killed.

Boeing is under pressure to deliver an upgrade on software that is under scrutiny in both crashes and convince global regulators that the plane is safe to fly again, a process expected to take at least 90 days.

The timing of a prolonged grounding could not be worse for northern hemisphere carriers. Planes run fullest during June, July and August, when airlines earn the most revenue per available seat mile, according to US Bureau of Transportation Statistics. –