According to a Thursday report from Indonesian news site Tempo.co, the Lion Air Group will incur losses of around $20 million due to the 737 MAX crisis. Of course, Lion Air was the first airline to experience the devastation firsthand as one of it’s 737 MAX aircraft crashed into the sea in October 2018.
The 737 MAX has been banned by countries around the world since March 2019. This ban will be in place until Boeing can fix its software and sensor issues. Boeing must regain certification by a number of civil aviation authorities. As a result, Lion Air’s 10 737 MAX aircraft stay on the ground, unable to generate passenger revenue.
In a statement to media, Daniel Putut – Lion Air Group Operations Director – said “Yes, it’s multiplied, approximately US $20 million”. In fact, we wrote recently about how lost revenue is just one cost: the planes also take up precious storage space and require regular maintenance as an additional cost to the airline.
Awaiting FAA approval
In the same statement to media, Mr. Putut emphasized the need for various levels of approval before the aircraft can take off again. This includes not only the United States’ Federal Aviation Administration but also Indonesia’s regulatory body – the Ministry of Transportation:
“We are waiting for the decision of the Ministry of Transportation…To upgrade the fleet, we must obtain a seal of approval from FAA. The FAA has agreed to it, and our regulator must follow its suit. We are waiting for the process. As the operator, we wait for the regulator’s decision,”
As a matter of fact, airlines around the world find themselves in the exact same situation. They are all waiting as the FAA works closely with Boeing to perform rigorous tests to ensure problems are rectified.
We’ve written extensively on reports and rumors regarding when the 737 MAX will gain re-certification. The latest at the time of writing this article is that Boeing is telling Spicejet that the planes may fly as early as July.
Airlines seeking compensation
Indonesian sources reporting on Daniel Putut’s statements did not mention if the airline has officially demanded compensation directly from Boeing for the grounding. However, if it did, then Lion Air would be joining an ever-growing group of carriers officially demanding compensation from Boeing for lost revenue:
- AeroMexico with its fleet of 6
- Norwegian has a fleet of 18
- China Southern’s fleet of 24
- China Eastern’s 14
- And Air China with it’s fleet of 15
Boeing has yet to make any official statement regarding airline compensation.Air China is demanding compensation as it’s fleet of 15 737 MAX aircraft sit on the ground. Photo: Wikipedia
According to the website Chief Investment Officer, Boeing faces a number of class-action lawsuits regarding its 737 MAX aircraft. Lawsuits come from various groups including:
- Boeing shareholders
- Family members of victims in Lion Air’s October incident
- Two Canadians who lost 10 family members in the Ethiopian crash
- The former inspector general for the U.S. Transportation Department on behalf of the estate of George Thugge – an Ethiopian Airline’s crash victim
- An Australian pilot seeking damages for “present and future losses” brought about by the psychological impacts of the two MAX crashes
How much do you think this entire situation will cost Boeing? Let us know in the comments section.