Icelandair Agrees More 737 MAX Compensation With Boeing

The Icelandair Group has reached a second agreement with Boeing regarding the compensation it is owed for the suspension of the 737 MAX aircraft. The details of the agreement are confidential.

Icelandair Boeing 737 MAX
Currently, all Boeing 737 MAX aircraft are grounded. Photo: Dylan Agbagni via Flickr

Yesterday, the Icelandair Group released its third-quarter results in which it stated that that the airline has come to a second agreement with Boeing. An initial agreement was reached in September, but discussions are still ongoing. In their results, the airline commented,

“…another agreement was made on second partial compensation. Details on these agreements with Boeing are confidential. The Company is in ongoing discussions with Boeing regarding further compensation for the financial loss resulting from the suspension.”

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What happened?

The Boeing 737 MAX fleet has been grounded since the two fatal crashes in October 2018 and March 2019. There are ongoing investigations into the causes of the crashes and over the safety of the 737 MAX aircraft. Boeing 737 MAX planes were first put into use in 2016. Both fatal crashes involved the 737 MAX 8.

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Lion Air Boeing 737 MAX 8
Lion Air was operating the Boeing 373 MAX 8 which crashed in October 2018. Photo: Boeing

So why does Boeing owe Icelandair compensation?

Icelandair had expected to have nine 737 MAX in operation by the end of this year which would have accounted for 25% of its fleet, as reported by Flight Global. The result of the suspended aircraft has left the airline with an imbalance that has affected its fares and routes.

In its quarterly statement the airline said: “The number of available seats has been reduced as a result of the MAX suspension”. This has resulted in an 11% drop in capacity compared to previous years.

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Icelandair Aircraft
Icelandair has had to adapt its flight schedule due to the grounded 737 MAX. Photo: Riik@mctr via Flickr

Icelandair currently has five Boeing 737 MAX aircraft which have been grounded since the March incident. The airline has said that it does not think the planes will be in service until at least the end of February next year. The airline was expected to take delivery of three more 737 MAX aircraft this year with another aircraft due next year. However, they have now stated that this is “uncertain at this point in time”.

Due to the ongoing complications of the grounded aircraft, the airline has had to adjust its flight schedule until the planes are back in service. The airline commented that “We have managed to reduce the impact of the MAX suspension by implementing an extensive action plan”. 

Additionally, the company was recently forced to transport its five grounded planes to Spain in order to protect them from harsh winter weather. The warmer Spanish climate will help to protect the sensitive equipment from damage.

A Boeing 737 MAX aircraft engine
Due to harsh winter conditions, Icelandair has moved all its grounded Boeing planes to Spain. Photo: Liam Allport via Flickr

What is happening with the Boeing 737 MAX now?

Icelandair is not the only airline that is coping with grounded Boeing 737 MAX aircraft. Yesterday, Reuters reported that American Airlines staff are refusing to work on the 737 MAX amid continuing safety concerns.

This comes just days after Boeing CEO Dennis Muilenburg was questioned by Congress regarding the safety of the 737 MAX fleet and despite his assurances that, “We’ve dedicated all resources necessary to ensure that the improvements to the 737 MAX are comprehensive and thoroughly tested. When the 737 MAX returns to service, it will be one of the safest airplanes ever to fly.”

But after reports earlier this year that a Boeing pilot tried to raise awareness of issues in 2016, do you think the American Airlines staff are correct in expressing continuing concern over the grounded aircraft?

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Andy

I think Boeing really will have a sound product at the end of this fiasco. The trouble is that all that customer confidence has to be rebuilt. And that takes a long time.
Boeing simply can’t afford to have another MAX crash in dubious circumstances.

dinop

I wonder if Norweigan is getting compensated in similar manner because they are really struggling.

Peter

I’m afraid that I don’t agree with Andy. For various reasons, I have a feeling that there’s a lot of nasty stuff about the MAX that hasn’t yet been published. For one thing, the Washington testimony this week came across (to me, at least) as one big cover up / smokescreen / stalling exercise. On another front, I note that Boeing is no longer giving us projected re-intro dates — to the great frustration of customers like Southwest. And, importantly, I don’t think the two-sensor “improvement” of MCAS that’s currently being proposed is sufficiently failsafe. I’ve also seen discussion on another aviation forum relating to possible faults in the autopilot.
I’ve actually reached a stage with MAX re-certification where “I’ll only believe it when I see it”.

Brad Fenn

Just have a gut feeling that’s it’s going to be a considerably longer time for EASA to recertify the MAX, if they even do at all. If and when it is recertified God help Boeing if there is any accident involving the MAX regardless of whether or not it is related to current issues.

Kevin

This isn’t rocket science. Boeing built this aircraft in a rush in order to compete with Airbus’ decision to re-engine the A320 family of aircraft. Boeing had nothing in the works to compete with the A320NEO so they attempted to modify their existing 737. But they faced several major problems in taking this approach. Problem #1: How to keep the 737 so similar to the original type certification by the FAA so as to not have to face a full scale re-certification? By placing the larger Max engines further forward and up on the wing, they were attempting to do this by maintaining as much of the original 737 as they could and, in the process, created an aircraft that changed the center of gravity from the legacy, classic, and next generation 737’s. This should have been enough, on it’s face, for the FAA to do a full re-certification. They didn’t. Problem #2: How to market the Max to airlines that needed to be convinced to spend upwards of $50 milllion US per aircraft at a time when many of their aircraft still had considerable useful life remaining? Boeing accomplished this by convincing the FAA, and later their airline customers, that the Max was so similar to the other 737’s that minimal additional pilot training would be necessary. And they convinced FAA that there was no need to make any mention of the MCAS software to the pilots as it would only operate under very rare circumstances. Naturally Boeing’s airline customers loved this since they wouldn’t have to spend money on training.

There are many more problems and I could go on but these are the main points. At the end of the day the Max is likely to be re-certified by the FAA, but it shouldn’t be. Boeing will end up with the same flawed aircraft for the same reasons that they designed it in the first place. Nothing has really changed. Sorry Andy, sorry Dennis Muilinberg, this will not be the safest aircraft to ever fly. This is an aircraft that is likely to encounter many more problems in the near future and I, for one, will never board one of these aircraft. Period.

Flyboy

I think the answer is very, very simple: Muilenburg and the board and senior management should fly on a Max EVERY SINGLE DAY (not all together) for the first 6mo. They need to eat their own cooking otherwise why would anyone have any confidence in the manufacturer?