AeroMéxico Wants In On Boeing 737 MAX Compensation

AeroMéxico have become the latest airline to seek compensation from Boeing for the 737 MAX grounding. With the summer season approaching and no sign of the MAX returning to service, many airlines are looking to the US manufacturer to reimburse their lost earnings.

Aeromexico 737 MAX
Aeromexico have six 737 MAX currently grounded. Photo: Wikimedia

With the grounding of the 737 MAX now entering its third month, airlines around the world are beginning to ask when they can expect to get their planes back in service. The FAA have been clear that they will not put a timeline on the aircraft’s return, although some carriers are tentatively scheduling it from August onwards.

Now, according to CH-Aviation, AeroMéxico are planning to engage with Boeing in order to secure compensation.

AeroMéxico seek compensation

As Mexico’s top airline, AeroMéxico took the lead in grounding the MAX ahead of the FAA decision. Along with Aerolineas Argentinas and Brazil’s Gol, it ceased operating the 737 MAX on the 12th March 2019, following the two deadly crashes. In a press release, the airline said:

“The airline reiterates that it has full confidence in the safety of the fleet and that during the last year, it has operated the Boeing 737 MAX 8 aircraft in safe, reliable, and efficient conditions. Nevertheless, Aeromexico has decided to temporarily suspend the operation of its 6 Boeing 737 MAX 8 aircraft until more thorough information on the investigation of the flight ET302 accident can be provided.”

They said at the time that flights due to be operated by the 737 MAX would be taken care of by the rest of the fleet.  However, now they are approaching the busy summer season, and having six aircraft out of operation is going to impact their economics significantly.

 

Aeromexico MAX
Aeromexico say that the grounding of the MAX has ‘hurt’ them. Photo: Tomas del Coro via Flickr

James Sarvis, director of operations, said that the grounding of the MAX has meant they’ve had to retain other aircraft that were going to be sold, not to mention extending leases on some that should have been returned. Speaking to LaJornada, he said (translated),

“I’m not going to lie that it has had an economic impact, the loss of the Max and the cost of fuel that continues to rise in a very fast way, it hurts us”

As well as the six grounded aircraft AeroMéxico have in their hangars, they should have received at least one more of the 60 they have on order from Boeing by now.

What could they be compensated for?

Clearly, some of the airlines seeking compensation for the grounding of the 737 MAX will be looking to recoup some of the lost earnings they’ve had to cope with while not flying the planes. Many airlines have had to cancel flights, which means lost revenue for them.

However, this is just the tip of the iceberg, and a small fraction of what airlines could look to claim back from Boeing. For example, they could also look for:

  • Leasing costs: Some airlines have had to either lease new planes or extend existing leases in order to cover the lost capacity from the 737 MAX grounding. This is an expense they could do without and may plan to claw back from Boeing.
  • Storage and maintenance costs: It has been estimated that the costs of storing and maintaining each 737 MAX runs to around $2,000 per month.
  • Return to operation: Before the MAX can be returned to service, there are a number of challenges to overcome, not least in making sure every aircraft is airworthy. This means testing fuel, engines, cleaning, flight testing and much more. All of which come at a cost.
Norwegian MAX
Norwegian have already stated they want compensation for the MAX. Photo: Norwegian Air

AeroMéxico are not alone in seeking compensation. Already Norwegian have said they will look for compensation, airlines in China are also demanding compensation, and Boeing have allegedly reached some sort of a deal with Ryanair. If compensation payments are forthcoming, it could see Boeing down many millions of dollars.

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Vince

It will be interesting to see how the airlines seek for the compensation of the lost revenue during the summer peak periods. Especially when Boeing had said that they will not be compensating for these lost revenues.

Norm

It would be very interesting to see the outcome from a Commercial and Financial point of view how BOEING will handle these rightful demands for compensation by the Airlines. On the other hand, I’am also curious, as an ex-Insurer, whether Airlines, as Hull & Liability Insurance had Contingent Business Interruption/Loss Of Profits endorsement to cover Suppliers Errors & Omissions which caused the Airlines to cease B737 MAX’s Operations, thus dramatically affecting the respective airlines P&L Results.

Frank

Apparently a 737 Max depreciates at the rate of $9,000+ a day. Dry leasing a similar aircraft falls in the $14,000 a day range. As well, once an aircraft has been sitting on the ground for more then 2 months, it is considered to be in long term storage and it is no longer a matter of just starting the engines and checking the oil. I have read that it will require about 30 days worth of work to get an aircraft ready for passengers (kinda sounds like a C-Check). China’s combined fleet is depreciating a million dollars a day,… Read more »

HSG

If its a Boeing, I aint going!!