Fri | Apr 19, 2019

Financial pressure mounts to fix Boeing’s troubled jetliner

Published:Sunday | March 31, 2019 | 12:33 AM
In this March 11, 2019 file photo, rescuers work at the scene of an Ethiopian Airlines flight crash near Bishoftu, or Debre Zeit, south of Addis Ababa, Ethiopia. Investigators have determined that an anti-stall system automatically activated before the Ethiopian Airlines Boeing 737 Max jet plunged into the ground, The Wall Street Journal reported Friday, March 29.

Boeing is facing mounting pressure to roll out a software update on its best-selling plane in time for airlines to use the jets during the peak summer travel season.

Company engineers and test pilots are working to fix anti-stall technology on the Boeing 737 Max that is suspected to have played a role in two deadly crashes in the last six months.

The Wall Street Journal reported Friday that investigators have determined that the flight-control system on an Ethiopian Airlines jet automatically activated before the aircraft plunged into the ground on March 10.

The preliminary conclusion was based on information from the aircraft’s data and voice recorders and indicates a link between that accident and an earlier Lion Air crash in Indonesia, the newspaper said. Boeing and the Federal Aviation Administration declined to comment on the report.

Sensor Malfunction

Also on Friday, The New York Times reported that the Ethiopian jet’s data recorder yielded evidence that a sensor incorrectly triggered the anti-stall system, called the Maneuvering Characteristics Augmentation System, or MCAS. Once activated, the MCAS forced the plane into a dive and ultimately a crash that killed everyone on board, the newspaper said.

The Max remains grounded worldwide and airlines are losing money by cancelling flights.

Southwest, the largest operator of the Max with 34 of them and another 249 on order, said this week that the grounding caused it to cancel 2,800 flights so far, or 30 per cent of all cancellations in the first quarter. It said cancelled flights, including those not related to the Max, will cost it $150 million in revenue for the quarter and cut its planned capacity growth for the entire year.

German tour operator TUI Group said 2019 profit will drop about 200 million euros ($225 million) because of the Max grounding. That forecast assumes the planes are flying again no later than mid-July.

United Airlines, which has 14 Max jets, said the grounding isn’t hurting the airline yet, but the financial pain “is expected to increase if the grounding extends into the peak summer travel season”.

Boeing is also seeing its own expenses rise, although it would not disclose how much it is costing the company to make the software fix and also train pilots how to use it.

Cowen Research analysts say a “very rough guess” is that Boeing will pay about $2 billion after insurance to fix the plane, pay crash victims’ families and compensate airlines that had to cancel flights.

Most Wall Street analysts are betting that the planes will be flying again in less than three months, while noting that it could take longer in countries that plan to conduct their own reviews of Boeing’s upgrade instead of taking the word of the US regulator, the Federal Aviation Administration.

Boeing has stopped Max deliveries during the grounding, which cuts into cash flow — Boeing gets most of its money for a plane upon delivery. Outside estimates of the cash-flow drain range from $640 million to $1.8 billion a month, but Boeing will get that money eventually unless airlines cancel orders.