Smartwings Sues Boeing For 737 MAX Grounding Compensation

The fallout from the 737 MAX grounding continues with Czech airline Smartwings suing Boeing. Smartwings initiated legal action against Boeing on Tuesday. The low-cost airline is seeking an unspecified amount of damages caused by the plane’s grounding.

Smartwings is suing Boeing over the 737 MAX saga. Photo: Smartwings

Relationship breaks down over the 737 MAX

Smartwings ordered three Boeing 737 MAX 8s in 2013, adding a further five in 2017. The airline also agreed to lease a further 31 MAXs to replace its single-aisle fleet of mostly 737-800 planes. The first MAX 8 touched down in Prague in early 2018.

According to airline database, Smartwings took seven MAXs before the grounding. Six of the seven MAXs are leased. Following two fatal crashes, the 737 MAX was grounded around the world in March 2019. Regulators only began unwinding that grounding late last year.

Last year, Smartwings said the MAX grounding cost the airline at least US$93.8 million. In February, Smartwings resumed flying its fleet of MAXs. Six of the seven MAXs are categorized as active, with one (OK-SWC) still parked in Prague.

Boeing delivered the first 737 MAX to Smartwings in early 2018. Photo: Boeing

Smartwings makes some inflammatory claims about Boeing & the 737 MAX

According to a Seattle Times report on Wednesday, Smartwings is pursuing financial damages, wants to return one plane, and is seeking a refund of payments made for that plane and advance payments on other MAXs.

The same report says Smartwings has canceled its remaining direct orders from Boeing. Smartwings had paid US$833,332 in advance payments for two planes. The airline also wants that money back. Smartwings is also pursuing further unspecified damages.

In its filing, Smartwings makes several allegations against Boeing and its handling of the MAX program. Smartwings alleges Boeing did not conduct a full safety evaluation regarding the Maneuvering Characteristics Augmentation System’s (MCAS) failure modes.

“(Boeing) misled the Federal Aviation Administration and other regulators regarding the nature and purpose of MCAS,” the filing says.

Rather than making aerodynamic changes to the MAX, Smartwings alleges “Boeing chose a cheap and hastily implemented bandaid.” Smartwings further alleges “gross negligence and fraud” on Boeing’s part and says the aircraft manufacturer made “material misrepresentations and nondisclosures” to pilots about MCAS.

Smartwings is launching a high wire legal strategy against Boeing. Photo: Smartwings

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A high wire strategy by Smartwings

The inflammatory language suggests a significant breakdown in the relationship between Boeing and Smartwings. It is a long way from the mutual backslapping and positive PR statements when the first MAX landed at Smartwings over three years ago.

Smartwings is not the first airline to seek recompense from Boeing regarding the MAX. But to take the complaint public and initiate a lawsuit is a high-risk strategy. Smartwings has 40 aircraft in its fleet, and 39 of those 40 planes are Boeings. The airline will need ongoing support from Boeing to keep these planes operating.

Contractual obligations aside, how forthcoming that support is and at what price might well depend on the strength of the relationship between the airline and the aircraft manufacturer.

The lawsuit strategy also places Smartwings on the back foot when buying new planes in the future. While aircraft manufacturers are keen to cut deals to keep production lines running and revenue coming into their coffers, ill will generated by suing Boeing could see the planemaker less willing to broker a deal for Smartwings in the future.

You might think that’s easily solved by taking your business over to Airbus. But when that aircraft manufacturer knows you’re sitting at the negotiating table in Toulouse because you’re persona non grata at Boeing, Airbus is unlikely to cut you much financial slack.

It is fallout a clever operator like Smartwings is no doubt aware of. After weighing the pros and cons of suing Boeing and making some inflammatory claims, they’ve clearly decided stepping into the courtroom is the best strategy going forward.