Boeing crisis: Growing trouble as airlines consider slashing orders

Donald Trump said he hopes the grounding of Boeing’s 737 Max family of passenger jets is only temporary but the US had to take a “cautionary route” after the plane was involved in two fatal crashes.

Boeing crisis: Growing trouble as airlines consider slashing orders

Donald Trump said he hopes the grounding of Boeing’s 737 Max family of passenger jets is only temporary but the US had to take a “cautionary route” after the plane was involved in two fatal crashes.

“I hope it is going to be for a short period of time. They have to find out what it is,” the US president told reporters at the White House.

The Federal Aviation Administration grounded Boeing’s 737 Max on Wednesday, reversing course after standing nearly alone by allowing the jets to remain in the air while aviation authorities and airlines across the globe halted flights in recent days.

The first concrete evidence of a possible link between two deadly Boeing 737 Max crashes came from space.

A new satellite network capable of tracking planes in high fidelity across the globe captured the flight path of the 737 Max that crashed Sunday.

The data was critical in persuading the US to join the rest of the world in grounding the jet, according to industry and regulatory officials.

The erratic, six-minute flight of the Ethiopian Airlines plane convinced the Federal Aviation Administration it was close enough to what preceded the October 29 crash of another 737 Max off the coast of Indonesia to warrant concern.

FAA acting administrator Dan Elwell said the decision was based on the new evidence. “It became clear — to all parties, actually — that the track of the Ethiopian Airlines flight was very close and behaved very similarly to the Lion Air flight.”

Kevin Durkin, an aviation lawyer, said the connection could be important in any court cases.

If Boeing knew of a defect in the 737 Max fleet, the plane manufacturer could face extra damages in lawsuits. The company’s knowledge might be demonstrated by its statements that it was making software changes after the Lion Air crash, he said.

“We had to take a cautionary route. The grounding of the planes yesterday was a big thing,” Mr Trump said.

He called Boeing “a great company,” adding “hopefully they’ll figure it out very quickly.”

Ethiopia has sent black boxes from the crashed Boeing jet to France for decoding after refusing to hand them to US authorities that had kept the Max model flying after most other regulators grounded it.

FAA officials privately briefed members of the House Transportation and Infrastructure Committee.

Panel members including Democrat Steve Cohen of Tennessee and Republican Bruce Westerman of Arkansas said afterward they were given no indication of how long the grounding and investigation would last.

More signs emerged of a weakening order book for the 737 Max.

Garuda Indonesia plans to slash its remaining order for 737 Max planes and said it may switch suppliers.

Garuda initially planned to slash its 737 Max orders to 20 planes from 49 outstanding before the October disaster involving Lion Air flight 610.

Now it plans to cut even more, president director I Gusti Ngurah Askhara Danadiputra said in Jakarta.

Garuda is open to switching to other suppliers. A decision will depend on negotiations with Boeing and assurances from the FAA.

The airline, which had ordered 50 737 Max 8 jets in 2014, has taken delivery of just one aircraft, which has been grounded after the Ethiopian Airlines crash. The planes were to be delivered through 2030, Mr Danadiputra said.

“After reviewing the latest development, especially the increasing customer concerns toward Max 8, we have lost the confidence in the product,” Mr Danadiputra said.

Xi Jinping will discuss a major order of Airbus planes with his French counterpart, Emmanuel Macron, when the Chinese president visits Paris this month, a French official said. There are “positive signals” regarding the contract, the official said.

Mr Macron, who is traveling in Africa, touted talks for Chinese and Ethiopian deals to buy more Airbus jets. France had earlier confirmed it’s received the black boxes from the Ethiopian Airlines crash and will download the data.

Snatching a deal would be a boost for Airbus in a country that’s become a battleground with Boeing for orders.

It was reported in September that chances for a €15.9bn Airbus deal had been revived amid China’s trade war with the US, while Chinese purchases of US goods are part of talks to resolve the two countries’ differences — which could give Boeing a lift.

Average airfares in India soared after the nation joined others in grounding 737 Max jets, shrinking capacity in the world’s fastest-growing aviation market, where carriers have traditionally lured first-time flyers with ultra-cheap fares.

Average fares on 14 main routes jumped more than 65%, compared with a year ago, data from online travel agent showed. In contrast, fares on average were up just about 30% on February 12, when India was yet to decide on grounding the Boeing jets, the data showed.

More than a quarter of Indian budget carrier SpiceJet’s narrow-body fleet was idled after the ban.

SpiceJet is one the biggest customers for Boeing with as many as 205 of the Max jets on order.

“The DGCA’s decision to ground 737 Max aircraft has resulted in a fairly significant impact on the airfares for immediate travel on certain key routes,” said Sharat Dhall, chief operating officer of the business-to-consumer segment at Yatra Online Pvt.

“With current increase in load factors and this reduction in capacity, we expect airfares to rise further in the short to medium term.”

Boeing, whose shares have lost 11% of their value this week, faces escalating financial risk.

“With extensive grounding of the 737 Max, near term news could get worse for Boeing before it improves,” Cai von Rumohr, an analyst with Cowen, said.

However, he added, because the company is readying an update to its flight-control software, “we don’t see meaningful long term risk.”

Indeed, the only real rival to Boeing is Airbus, whose production line for the A320neo is full well into the next decade.

- Bloomberg

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