Boeing 737 MAX Cleared to Fly Again, Amidst Plummeting Demand for Air Travel and Aircraft as a Result of COVID-19

By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.

The Wall Street Journal features an article today on the Boeing 737 MAX being cleared to fly again, Boeing 737 MAX Cleared to Fly Again, but Covid-19 Has Sapped Demand.

Unfortunately, the CoVID-19 crisis has killed demand for air travel and new aircraft, especially a model that crashed twice and revealed the details of the sausage-making  of Federal Aviation Authority (FAA) regulatory decisions.

The FAA’s chief, Stephen Dickson, signed a formal order today lifting the grounding, 20 months after the original suspension decision,  according to the New York Times, Boeing 737 Max i s Cleared by F.A.A. to Fly Again. The F.A.A. really had no choice in instituting a flying ban for the 737 MAX, as i was merely joining other countries that had already done so.

Over to the WSJ;

The U.S. on Wednesday approved Boeing Co. BA 3.78% ’s 737 MAX jets for passenger flights again after dual crashes took 346 lives, helping to resolve the plane maker’s biggest pre-pandemic crisis.

The Federal Aviation Administration’s official order to release the MAX, grounded since March 2019, comes as the beleaguered Chicago aerospace giant grapples with a host of new problems amid the continuing health crisis.

The FAA’s order for ungrounding would allow Boeing to resume delivering the jets to airlines and let them carry passengers. But the pandemic has sapped demand for air travel, prompting airlines and aircraft-leasing firms to cancel about 10% of Boeing’s outstanding MAX orders this year. Boeing has said it believes hundreds more of its remaining 4,102 orders could be in jeopardy.

By its action, the FAA concluded that the company had addressed the problems that caused the crashes. Over to the NYT:

Investigators have attributed the crashes to a range of problems, including engineering fl mismanagement and a lack of federal oversight. At the root was software known as MCAS, which was designed to automatically push the plane’s nose down in certain situations and has been blamed for both crashes.

In August, the F.A.A. determined that a series of proposals by Boeing — including changes to MCAS, flight crew training and the jet’s design — “effectively mitigate” its safety concerns. Mr. Dickson, a former Delta Air Lines pilot, took the controls on a test flight in September, saying he liked what he saw.

The situation has already cost the company billions of dollars. As Naked Capitalism has  written previously, even before the pandemic began, Boeing was unlikely to recoup its costs anytime soon, let alone turn a profit. The fallout from crashes of a Lion Air Jet in October 2018 and an Ethiopian  Airlines flight in March 2019 has only worsened as the prospects for most world airlines are in freefall. The WSJ says:

The manufacturer has estimated the debacle had cost it about $20 billion, which includes financial hits related to halting production earlier this year. Engineering mistakes and management lapses provoked a tangle of civil litigation, a criminal investigation and congressional scrutiny.

Restoring trust in its oviduct during the current parlous operating conditions for world airline is an uphilll battle. According to the WSJ:

Meanwhile, the plane maker has said it is working to restore credibility with the public. In planning for the MAX’s return, airlines have said they considered potential passenger reaction, conducting their own surveys and laying out plans to rebook any nervous travelers on different aircraft.

The MAX debacle prompted consternation among some of the company’s biggest customers, sparked a boardroom and management shake-up inside Boeing and pushed the plane maker to revamp internal engineering and safety-reporting procedures.

This year, Boeing customers have either walked away from jets whose delivery has been delayed more than a year, as their contracts typically allow them to do without penalty, or put off taking the aircraft to future years when, according to industry predictions, air travel recovers toward pre-pandemic levels.

Airlines around the world have been struggling financially throughout the pandemic, in many cases putting the brakes on long-planned airplane purchases as they lay off thousands of employees, save cash and restructure debts. Some have stopped flying altogether, further expanding the glut of planes.

Not everyone is satisfied with the steps taken by the company so far. As the NYT reports:

In a news conference on Tuesday in anticipation of the F.A.A. announcement, relatives of victims on the second plane that crashed, Ethiopian Airlines Flight 302, questioned whether Boeing had done enough to address safety concerns with the plane.

“Aviation should not be a trial-and-error process; it should be about safety,” said Naoise Ryan, whose husband, Mick, was aboard that flight on March 10, 2019. “If safety is not prioritized, then these companies should not be in business.”

The Bottom Line

Will Boeing be able to recover from this debacle, amidst the ongoing pandemic’s effects on air travel? I don’t think so.

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