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In the last few days, Boeing has announced it is temporarily ceasing the production of the grounded 737 Max aircraft, after the announcement by the US-based Federal Aviation Administration (FAA) decided in early December that it would not be approving the aircraft’s’ return to the skies before 2020.
“Safely returning the 737 Max to service is our top priority,” Boeing said in a recent statement following the announcement. “We know that the process of approving the 737 Max’s return to service, and of determining appropriate training requirements, must be extraordinarily thorough and robust, to ensure that our regulators, customers, and the flying public have confidence in the 737 Max updates.”
As the halt on production continues, the aviation industry itself has revealed a number of vulnerabilities because of this disruption. The current commercial aviation industry is represented by a duopoly for aircraft – Boeing and Airbus – and the grounding of the 737 Max, expected until April 2020, puts stress on the industry.
Impacts on the aviation supply chain
The supply chain for the aviation industry has been steadily reducing for the last few decades due to consolidation. With the 737 Max now out of service, many manufacturers for Boeing have filled their production gap with other programs to avoid financial insecurity. As it is still unclear when the backorder of aircraft can resume production, those working as manufacturers or sub-tier suppliers will require ample notice if they will have to resume work on the 737 Max. Some suppliers may have let people go due to the lack of work, and having to re-hire employees may prove troublesome within a short window.
The current grounding of the 737 Max fleet will also require qualified aircraft mechanics to assess aircraft before going back into service. As the skills of mechanics are already in high-demand within the industry, bringing back the 737 Max into service may be delayed based solely around the availability of skilled labour.
Legal trouble
The grounding of the 737 Max fleet has also embroiled Boeing in legal issues. Dublin-based Timeraro Ireland Ltd., an aircraft leasing company, is seeking more than $185 million in damages after the firm alleges Boeing refused to repay advanced payments on an order for 22 aircraft. In August, Boing was sued by a Russian-based aviation leasing company for a breach of contract on 35 aircraft. This case was voluntarily dismissed in October, after the two sides came to an “understanding”.
Leasing companies account for more than 40% of outstanding 737 Max orders. Airlines typically have to continue paying rent on aircraft that have been grounded, though some plane-rental executives have said Boeing has stepped in to cover payments.
Boeing has stated that it hasn’t had any direct cancellations because of the grounded fleet, however some customers have swapped Airbus-manufactured aircraft or, in the case of India’s Jet Airways, gone bankrupt.