737 Max Ground Stop; How Much is it Costing?

Boeing advised yesterday that as a result of delays in the testing and subsequent re-certification of the 737 MAX it would cease production of the troubled aircraft in January 2020.

Production of the 737 is a global business with customers and suppliers around the world; there are about 600 suppliers in the US alone.

Giving even a close estimate of the current and anticipated losses so far is complex and difficult, but here are a few example to suggest the size of the catastrophic impact of the continued grounding.

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Southwest Airlines in the US expects to cancel roughly 300 out of 4000 flights daily during the spring & summer seasons of 2020. Their loss of revenue is likely to easily exceed $435 million. Their pilots are suing Boeing for $100 million in lost income.

Tui in Europe is anticipating a loss in the region of €500 million.

Ryanair has reported it will cut its growth rate from 7% to 3% since it anticipates carrying as many as five million fewer passengers in the current financial year.

Norwegian, Turkish, American, Icelandair and many others are all expecting to be heavily affected.

One estimate is that the total impact on airlines will be roughly $1 billion. A month.

And for suppliers? Shares in Spirit AeroSystems in Kansas, the supplier of the MAX fuselage have dropped by over 5% in the last two days. The UK engineering group Senior plummeted 11% today, Tuesday. Shares in France’s SAFRAN who (together with General Electric) supply the CFM engines for the MAX lost 1.2%.

What of Boeing itself? So far, the losses are an estimated staggering $9.2 billion dollars and the manufacturer has committed to an additional $5 billion in compensation to airlines.

The Seattle giant’s problems are so big that they are expected to have a material impact on the US economy; a drop of 0.4% for GDP growth in the last quarter of this year, from 2.1% to 1.7%.

Truly massive and horrifying numbers. Let’s hope that Boeing can get the MAX flying again quickly in the new year.

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