$20m Cost To Grounding Lion Air Boeing 737 MAX Fleet

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.

Caption. Photo: Wikimedia Commons

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:

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

Other compensation

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
Lion Air it currently engaged in a lawsuit against Boeing for the October 2018 crash that killed 189 people. Photo: Flickr user Bathara Sakti

How much do you think this entire situation will cost Boeing? Let us know in the comments section.

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Bob Braan

Both Boeing and the FAA said the plane was safe originally and also safe after almost every other country had grounded it after two crashes. Why would anyone believe anything they have to say about safety now? They used to be the safest in the world. Now it’s all about profits so we are on our own for safety. The safest thing is to just avoid the 737 Max. I usually fly Delta. They don’t have any 737 Max aircraft. Google “Southwest Airlines is going to allow people who don’t want to fly on the Boeing 737 Max to switch… Read more »

Vince

US$20M losses is quite significant for LCC such as Lion Air. On top of that, Lion Air is also the operator involved the first B737max crash. Inevitably, the airline will be facing a difficult time winning the trust and confidence of passengers to fly with it again. With all these factors combined, It might just sent the carrier spiraling down like India’s Jet Airways. If that happens, Boeing might just lose another major customer for its B737max.