Aviation: Cost of Boeing groundings rising
Anglo-German tour operator TUI became the latest Boeing 737 MAX operator to warn of a hit to its profits as the U.S. planemaker moved to restore confidence in its best-selling model after two fatal crashes that have grounded the planes worldwide.
TUI said it was planning for the planes to remain grounded until at least the middle of July, costing it upwards of 200 million euros (C$300 million) in core profit, with “considerable uncertainty” about when the 737 MAX would return to service.
Boeing hopes a software fix that it plans to introduce may address a problem common to both accidents that killed a total of 346 people, as investigators into the two accidents focus on new anti-stall software known as MCAS.
Investigators looking into the March 10 Ethiopian Airlines crash have reached a preliminary conclusion that the anti-stall system was activated before the plane hit the ground, the Wall Street Journal said, citing people briefed on the matter.
Boeing’s fastest-selling, fuel-efficient 737 MAX jet, with orders worth more than US$500 billion at list prices, was grounded globally by the U.S. Federal Aviation Administration (FAA) and other regulators in the wake of the second crash.
TUI said on Friday that with no dates yet announced by Boeing for modifications of the aircraft, nor for approval of those changes by U.S. and European regulators, it was currently planning for the grounding to last until mid-July.
Other flight operators including Southwest Airlines — the world’s biggest operator of 737 MAXs — United Airlines and Air Canada have also warned of hits to their business from the grounding of the planes.
TUI, which has 15 737 MAXs representing 10 per cent of its fleet, said extra costs would include replacement aircraft, higher fuel costs, other disruption and negative trading impact, sending its shares down by around 10 per cent.
“Should it not become clear within the coming weeks that flying the 737 MAX will resume by mid-July, TUI will need to extend the above-mentioned measures until the end of the summer season,” hitting profits by another 100 million euros, it said.