LOT Polish Airlines this week reaffirmed its commitment to buying the Boeing 737 MAX. The airline’s CEO, Rafal Milczarski, suggested that the heart was leading the head when it came to cancelling orders for the trouble plagued aircraft.
"If somebody is ready to cancel the MAX order because of what happens I think it is more of an emotional decision than a rational decision," he said at the CAPA Centre for Aviation conference in Dublin.
LOT Polish Airlines has five 737 MAX aircraft grounded and an option for five more through its supplier, Air Lease Corporation.
“I can’t see reasons at the moment, unless the regulators find it, to cancel the MAX orders,” said the CEO.
As the 737 MAX grounding wears on, most airlines are standing by Boeing and quietly negotiating settlements with the manufacturer. It’s in everyone’s interests for confidence in Boeing to remain high. Rafal Milczarski is another airline CEO falling into line in this regard.
The small airline with big plans
Warsaw based LOT Polish Airlines is a Star Alliance member with 73 aircraft flying to 101 northern hemisphere destinations in Europe, North America and Asia.
It flies as far east as Beijing and Hanoi and as far west as Chicago. The airline has a codeshare agreement with JetBlue out of New York’s JFK to provide onward connection for passengers on its New York flights.
LOT Polish Airlines flies a fleet of Bombardier CRJ900 and Dash 8 Q400 aircraft, various types of Embraers, Boeing 737s and Boeing 787s. It has 737 MAX deliveries scheduled throughout this year.
The airline has big plans to triple its passenger numbers and extend its reach into Asia. It also sees itself as a potential hub airline for passengers moving between Central and Eastern Europe and onto intercontinental flights. It’s home airport, Warsaw, is reaching capacity and there are plans for a new multi billion dollar airport to serve as a European super hub.
LOT Polish another airline caught in the MAX fallout
The two earlier crashes and subsequent worldwide grounding of the 737 MAX have had serious ramifications at Boeing. In May, CNN Business reported that Boeing did not get any new orders for any aircraft throughout April 2019.
However, some analysts suggest this is mostly due to recent large orders rather than the grounding, with Richard Aboulafia, aerospace analyst for the Teal Group saying "It's just a massively over-ordered environment."
Nevertheless, the grounding has compounded a febrile relationship between many airlines and Boeing. Many carriers are seeking financial compensation from the manufacturer as the cost of having 737 MAXs sitting idle heads skywards.
American Airlines estimates the grounding will cost it USD$350 million, and Lion Air have said they will incur a USD$20 million cost. Lion Air suffered the first of the two 737 MAX crashes in October 2018.
Many airlines have cancelled or deferred 737 MAX orders. Garuda cancelled an order for 49 MAXs estimated to be worth USD$4.9 billion. In May, Virgin Australia announced it was deferring delivery of the first batch of the 48 MAXs it had on order. Just days ago, Azerbaijan Airlines deferred a delivery of 10 737 MAXs worth approximately USD$1 billion.
But, it has also been suggested that some airlines are using the grounding as an excuse to cancel orders when the real reasons are internal financial issues. There is probably some truth in this, but there is no doubt that the crisis surrounding the grounding of the 737 MAX is a major issue for Boeing. It shakes confidence in the manufacturer and it incurs significant financial and reputational costs.
LOT Polish Airlines may be a small carrier, but the expression of support will be music to Boeing’s ears. No doubt the big aircraft manufacturer is keeping note of those airlines and airline CEOs that stand behind it and those that don’t. LOT Polish Airlines won’t be considered one of the good time friends.