Southwest Airlines extends grounding of Boeing MAX jets to August

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Southwest Airlines customers relaxing on Thursday evening got an email that may mean their summer vacation could be more stressful and expensive than they planned.

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Southwest, the biggest operator of Boeing jets, is removing the grounded 737 MAX from its schedule until at least Aug. 5, well past the peak of the summer high season.

Company president Tom Nealon wrote in his email that the airline was taking the MAX out of its schedule two months longer than previously planned to reduce the need for last-minute changes during the summer travel season. The decision, he wrote, would make the schedule more reliable.

Unless Boeing can quickly fix software on a flight-control system implicated in two deadly crashes, other airlines are likely to follow Southwest’s example and remove the MAX from their schedules for an extended period.

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That, in turn, ratchets up pressure on Boeing to fix its bestselling plane so it can return to flying soon.

Last month, Boeing and federal officials said privately that the company would finish a software fix before the end of March. Instead, it was delayed by an unexpected problem that Boeing hasn’t fully described, and the company is now aiming to complete its work by late April.

CEO Dennis Muilenburg said Boeing pilots have flown 96 test flights totalling 160 hours with the new software and will operate more flights in the coming weeks to prove that the fix works.

When Boeing does complete its work, it must be submitted to the Federal Aviation Administration for approval. Foreign regulators including in Europe and China will then do their own reviews — significant because foreign airlines account for about 85 per cent of MAX orders, according to analysts for financial services firm Cowen.

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It remains uncertain how willing passengers will be to board the MAX after crashes in Indonesia and Ethiopia killed all 346 people on board.

“The general flying public seems to be asking more questions about the airplane than they have with prior fleet groundings,” said Goldman Sachs analyst Noah Poponak, referring to the 2013 grounding of Boeing 787s because of overheating lithium-ion battery packs. The 787 survived and became a hit with airlines and passengers.

The longer the MAX planes sit on the ground, the more money airlines lose. Southwest already figures that just the first three weeks the MAX had been grounded, along with other setbacks, cut first-quarter revenue by $150 million.

Southwest has been cancelling about 90 flights a day because its 34 MAX jets have been grounded since mid-March. Spokesman Chris Mainz said the new schedule eliminates about 160 daily flights to assure customers that it will operate the flights they booked.

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That is four per cent of Southwest’s 4,000 daily flights during summer. Still, unless the airline finds replacement planes quickly — and that can be a complicated process — Southwest will scrap about 10,000 flights that could have carried nearly 1.8 million people between now and early August.

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American Airlines doesn’t expect its 24 MAX jets to be flying before June 5, and it, too, is cancelling about 90 flights a day.

United Airlines, with 14 MAX planes, says it is shuffling its fleet and mostly covering flights that were scheduled with the MAX in mind.

Without those planes, travellers will have fewer flights to choose from, and fewer planes to carry passengers whose flights are cancelled for other reasons such as bad weather. There could also be fewer fare sales.

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“Travelers who have not already booked their summer reservations may end up paying a slightly higher airfare,” said Henry Harteveldt, a travel-industry analyst with Atmosphere Research Group. “But it’s not going to be the summer from hell.”

Harteveldt said he expects airlines that don’t have MAX jets — a list that includes Delta, JetBlue, Alaska and Spirit — will court travellers with price-cutting.

The cost of the MAX crisis to Boeing also rises the longer the plane is grounded and jets coming off the assembly line pile up around Seattle.

With aircraft orders booming, Boeing shares have soared for more than two years, although they dropped 17 per cent from March 1 through Thursday’s close. Most of Wall Street has expressed confidence that Boeing can fix the MAX quickly and regain momentum.

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Poponak, the Goldman Sachs analyst, said however there is a risk that Boeing orders could suffer for the next few years. He said some airlines seemed to view the Airbus competitor, the A320neo series, as superior, and some aircraft-leasing companies faced a challenge to place the MAX with airline customers.

The company took no new orders for the 737 MAX in March — not even before the March 10 crash of one in Ethiopia — and only 10 in the first three months of the year, down from 112 in the same period last year. The decline could be explained by the fact that many airlines that want the plane had already placed orders.

More immediately, airlines in China and Norway have said publicly they want Boeing to compensate them for their grounded planes. While other airlines have kept silent, analysts expect Boeing will make concessions that could total hundreds of millions of dollars.

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The Chicago-based company also faces a growing number of lawsuits by families of the crash victims.

Since its launch in 2017, the MAX had emerged as Boeing’s best-selling jet. Fewer than 400 have been delivered, but about 4,600 are on order.

Boeing stopped deliveries of the plane shortly after it was grounded, and it announced last week that it was cutting production of 737s from 52 to 42 a month.

Boeing hasn’t provided numbers on the financial impact from the MAX crisis. The company reports first-quarter earnings later this month.

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