Costs are mounting for US aviation giant Boeing and the airlines that rely on its planes after the 737 MAX aircraft was grounded around the world in March following two deadly crashes in five months.
Boeing has slowed production of the Max and stopped deliveries, stockpiling the finished planes at its factory in Seattle, Washington.
Major US airlines, including Southwest, United and American, which operate the 737 Max, have canceled thousands of flights due to the planes’ grounding.
And with no sign that the Max will be flying again anytime soon, Boeing is facing escalating bills, numerous legal threats and a crisis of confidence.
“Having two crashes in rapid succession with no survivors is really unprecedented in modern aviation industry,” said Chesley Sullenberger, the retired pilot who safely landed a jet in the Hudson River in New York in 2009.
“This is going to be a huge hit to Boeing. What they need to do now is to behave in a way that proves themselves worthy of the public’s trust.”
The world’s largest aviation company with more than 150,000 employees, Boeing has annual sales of over $100 billion.
It is the largest manufacturing exporter in the United States, making it an integral part of the American economy.
Boeing, which will report earnings this month, will undoubtedly take a financial hit this quarter, and most likely for the rest of the year.
American Airlines, which operates 24 Max planes and has 76 more on order, canceled about 1,200 flights in March. The airline also said it was lowering its estimated quarterly revenues, in part owing to the grounding of the Max.
“Boeing revenue, profit and margins for 2019 are in jeopardy after the grounding of its 737 Max,” according to a report by Bloomberg Intelligence, which estimated that the cost of lawsuits and reimbursements could total $1.9 billion in just six months.
Boeing has already taken orders for more than 4,600 Max jets, representing the vast majority of its total backlog and billions of dollars in future sales, but new orders are quickly declining.
Boeing this week slowed its production of 737 planes to 42 a month, from 52, with most of those being the Max model.
The Chicago-based company has not received any new orders for the 737 MAX since the crash in March, nor it could make deliveries of the grounded aircraft.
Already, some airlines are expressing reservations about continuing to fly the Max, including the national airlines of Indonesia and Ethiopia, the two countries where the Max crashed.
Boeing will also need to compensate airlines for the cost of canceled flights, leasing replacement aircraft and higher fuel costs on less efficient planes needed to replace the grounded Maxes.
Those costs could amount to about $115 million a month for Boeing, or perhaps much more, according to the JP Morgan analyst Seth Seifman.
Meanwhile, it remains unclear when regulators will clear the planes to fly again. Boeing had been hoping to submit a software update to the Federal Aviation Administration soon, but last week said work on the fix had been delayed by several weeks.
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