An American Airlines Boeing 737 Max 8, on a flight from Miami to New York City, comes in for landing at LaGuardia Airport in New York, U.S., March 12, 2019.SHANNON STAPLETON/Reuters
The high cost for airlines of training crews on a brand-new aircraft has long dogged Bombardier Inc.’s efforts to win customers for its C Series commercial jet.
Overcoming that challenge is central to what has made Boeing’s 737 Max so enticing to customers and a blow to rivals Bombardier and Airbus in the lucrative market for mid-sized aircraft.
Boeing persuaded U.S. regulators that 737 Max pilots didn’t need long and costly retraining on the aircraft because it’s essentially a modified version of the most widely flown plane in the world.
Sales literally took off after the aircraft’s launch in 2011, making the 737 Max Boeing’s fastest-selling aircraft. So far, the company has delivered 370 of the planes and has logged an astounding US$600-billion in orders for 5,000 more. Most of those are the Max 8, which seats up to 210 passengers.
The crashes of two brand-new 737 Max 8 jets in less than five months is a devastating human tragedy, killing 346 people.
It’s also threatening to become a major financial problem for Boeing. From inevitable lawsuits and investigations, to lost sales and a tarnished reputation, the potential losses are massive. And it all could take years to play out.
The roughly 11-per-cent drop in the price of Boeing shares since Sunday, when a Kenya-bound Ethiopian Airlines flight crashed soon after takeoff from Addis Ababa, is a warning of what may lie ahead. The two-day sell-off is the largest in more than 10 years for the stock, nearly matching losses suffered during the throes of the global financial crisis in November, 2008.
Particularly troubling for Boeing is what the fallout could mean for sales in China – among the most promising markets for the 737 Max. China, which is involved in tense trade negotiations with the Trump administration, was among the first of dozens of countries to ground the U.S.-made aircraft this week.
The company has not sold a single 737 Max in China since a trade feud between the countries broke out last year. But promises by China to buy more than US$1-trillion in U.S. goods – including Boeing planes – was to be a key piece of a proposed deal to end the standoff.
It’s hard to understate the 737 Max importance to Boeing. Orders for the aircraft make up two-thirds of future deliveries and 40 per cent of its profits, according to analysts.
The company continued to rack up orders – even after the crash of Lion Air 737 Max 8 in Indonesia in late October.
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The fallout from a second accident, with eerie similarities to the first, won’t be so easy for the company, or customers, to ignore – particularly if a defect turns out to be involved in one or both accidents.
It’s too early to confirm a link between the two accidents. But investigators in the Lion Air crash are looking at a software feature in the aircraft’s autopilot flight-control system that helps the plane from veering, or pitching, upward. In their redesign of the Max 8, engineers at Boeing relocated the engines on the fuselage, which apparently causes the nose of the plane to pitch up after takeoff.
Boeing has instead pointed to the Lion Air crew’s apparent failure to follow an emergency checklist to override the software.
Nonetheless, Boeing has been working with the U.S. Federal Aviation Administration (FAA) since the crash on a software upgrade for the 737 Max, “designed to make an already safe aircraft even safer,” according to a statement this week by the company. The fix, which includes changes to crew training and operation manuals, is slated to be installed on all 737 Max aircraft in the coming weeks. The Wall Street Journal has reported that “differences about technical and engineering issues” had dragged out negotiations between the company and the FAA over the upgrade in recent months.
Those training changes are no doubt on the minds of Bombardier officials as they watch Boeing’s struggles with more than passing interest. Boeing never wanted the C Series to succeed, dragging Bombardier into a long and ultimately failed trade battle to thwart sales of the aircraft in the United States.
The Montreal-based company gave up on going it alone with the C Series last year, selling control to deep-pocketed European aircraft maker Airbus. The plane has been renamed the A220.
It would be particularly bitter for Bombardier if investigators ultimately conclude that training shortcuts gave the 737 Max an unfair edge in the market.