Abu Dhabi, UAEThursday 27 February 2020

Boeing customer Flydubai mulls jet leasing options after latest 737 Max delays

Plane maker says it may not gain approval for grounded jet to fly again until mid-2020, adding to its financial woes

A worker looks up underneath a Boeing 737 MAX jet in Renton, Washington. Boeing doesn't expect federal regulators to approve its changes to the grounded 737 Max until mid-year. AP.
A worker looks up underneath a Boeing 737 MAX jet in Renton, Washington. Boeing doesn't expect federal regulators to approve its changes to the grounded 737 Max until mid-year. AP.

Flydubai, the second-biggest customer of the 737 Max outside the US, is considering leasing more jets after Boeing said it expects the grounded aircraft will not get approval to fly until the middle of this year.

The new estimated date for the jet's return to commercial service was based on factors that take into account its "experience to date with the certification process", Boeing said in a statement on January 21. The US plane maker has informed its airline customers and suppliers about its new timeframe.

"We are looking at short to medium-term leasing options to add more capacity for the coming few months," a Flydubai spokeswoman said in an emailed statement on Wednesday.

The new timeline estimate is a six-month delay from the previous forecast, adding to Boeing's financial difficulties and straining its customers. The latest projection for the 737 Max's re-entry into commercial service is more than a year since its global grounding in March 2019 following two deadly crashes that killed 346 people.

State-owned Flydubai has 250 Boeing 737 Maxs on order, making it the second-largest customer of the jet after Texas-based Southwest. The low-cost airline took delivery of 14 Boeing 737 Maxs before the grounding in March.

In efforts to boost capacity and cope with peak holiday travel, Flydubai in November leased four Boeing 737-800 aircraft from Czech airline Smartwings until January 25. The continued Max grounding resulted in a 30 per cent reduction of its flying schedule, it said in November.

Flydubai's chairman Sheikh Ahmed bin Saeed Al Maktoum had earlier warned that the airline could witness "significant" impact on earnings in the second half of its fiscal year if the global ban on the aircraft continues.

"We acknowledge and regret the continued difficulties that the grounding of the 737 Max has presented to our customers, our regulators, our suppliers, and the flying public," Boeing said on Tuesday. "Returning the Max safely to service is our number one priority, and we are confident that will happen."

The Max's comeback delay to the middle of the year will "reduce deliveries and increase Boeing's reimbursements to airlines, which we believe will easily top $10 billion," George Ferguson, Bloomberg's senior aerospace analyst, said in a note.

"Boeing will have to pay airlines for lost profit and the increased cost of training if simulator work is needed, as the [regulator] recommends," he said. "If US regulators greenlight the Max in June or July, it will miss most of the lucrative summer vacation season."

The estimated timeframe for the Max's return is subject to Boeing's "ongoing attempts to address known schedule risks and further developments that may arise in connection with the certification process", the company said. "It also accounts for the rigorous scrutiny that regulatory authorities are rightly applying at every step of their review of the 737 MAX's flight control system and the Joint Operations Evaluation Board process which determines pilot training requirements."

The plane maker identified a new flaw with the Max's software and found that two wiring bundles, if placed too closely together, could short circuit leading to tail control problems. It is working on fixing the issues.

Boeing reiterated that the US aviation regulator and its global peers will determine when the 737 Max returns to service. The company said it will provide additional information with quarterly results next week.

Updated: January 22, 2020 07:02 PM



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