Boeing 737 MAX Grounding Costs US Airlines Over $1bn

The grounding of the Boeing 737 MAX has had a global impact on aviation this year. One of the regions that has been hit the hardest is the United States, where it has been estimated to have cost airlines over $1 billion.

Southwest Airlines Boeing 737 MAX -8
Southwest is the biggest customer of the 737 MAX. Photo: Bill Abbott via Flickr

Large market

Globally, the biggest buyer of the aircraft is US airline Southwest, who has 280 737 MAXs on order, of which 31 had been delivered at the point of grounding. With these out of action, the carrier had to find a solution to storing its MAX 8 fleet. Therefore, earlier this year, the airline started to send planes to the Mojave Desert.

This arid land on the border of California and Nevada is a safer environment for stored aircraft. As these planes soak up the sun, CNN reports that the seven-month grounding has already cost Southwest $435 million up to the end of September. Southwest added that these costs will continue to grow in the fourth quarter and into 2020.

Made in America

Along with this, American Airlines ordered 100 units from the US-based manufacturer. The firm has received 24 units so far, with their first one being delivered in September 2017. The airline estimates that the hit to its pre-tax profit will be up to $540 million by the end of the financial year. Altogether, it has canceled 9,500 flights thanks to the grounding in the third quarter alone.

In addition, United Airlines is also a significant customer, with 137 of the range ordered. However, only 14 of these have been delivered since their original request in July 2012. In May, just one month into the grounding, United’s Operations Director said the losses already amounted to $20m. These costs will undoubtedly be creeping upwards, meaning this airline could be well into the hundreds of millions by now.

United Boeing 737 MAX
United is also hopeful of reintroducing the MAX in January. Photo: United Airlines

Costly response

To counter airline losses, Boeing has already set aside $5 billion to compensate airlines due to the 737 MAX situation. This value is to cover costs associated with the 737 MAX planes that were already with carriers at the time of the grounding. However, there were a further 400 MAXs due to be delivered by the end of this year. Therefore, airlines have incurred further losses due to having to fulfill services that were supposed to be operated by these planes.

With $1 billion of losses attributed to just a few airlines in the US, the global cost is likely to be significant, potentially far more than the amount set aside by the manufacturer to date. Then there are elements of the supply chain that could seek compensation, not to mention the families of victims and even the pilots.

Boeing 737 MAX 9
Boeing has set aside $5 billion to cover costs associated with the MAX’s grounding. Photo: Jeff Hitchcock via Flickr

Healthy reporting

Even though the issues related to the MAX had a hit on profits for the US airlines, both American and Southwest reported positive financial figures for the third quarter. Simple Flying reached out to the US-based airlines to find out more about the impact of the grounding. However, we hadn’t heard back before publication. We will update this article with any further announcements.

What do you think of the financial impact that Boeing has had on these US airlines? Let us know your thoughts in the comment section.

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Kaden

All this is Boeing’s reward for such a fast, lousy introduction of the Max……..