Airlines demanding compensation from Boeing for 737 Max fiasco losses
Airlines are beginning to demand compensation from Boeing as revenue losses are expected to mount after the troubled Boeing MAX 737 was grounded around the world.
European low cost airline Norwegian Air, which has eighteen 737 Max 8 planes in its fleet, has become the first airline to say publicly it will demand that Boeing pay for lost flight time.
“It is quite obvious we will not take the cost related to the new aircraft that we have to park temporarily,” Norwegian CEO Bjørn Kjos said in a recorded message to customers. “We will send this bill to those who produce this aircraft.”
He apologized to customers affected by the grounding of the planes and said passengers would be taken care of by combining flights, reallocating aircraft, and rebooking customers on other airlines.
The majority of Norwegian’s 737 MAX aircraft serve intra-European routes. The airline has also used the more fuel-efficient aircraft on Trans-Atlantic routes. It has ordered more than 100 of the 737 Max 8 planes.
Another budget carrier, India’s SpiceJet, also said it will seek compensation from Boeing and demand credit on maintenance, repair, and overhaul for its 12 grounded 737 MAX aircraft. The airline had an aggressive expansion plan that banked on the delivery of Max jets. It will now have to lease old planes.
“We will seek compensation from Boeing for the grounding of the planes. We will also seek re-compensation for revenue loss and any kind of maintenance or technical overhaul that the aircraft will have to undergo. This is part of the contract, which we signed with Boeing for all the 737 MAX aircraft,” an unnamed senior SpiceJet executive said.
The airline, which had 193 MAX 737 aircraft on order, planned to add 15 of them already this year. “We haven’t yet studied how many will be delivered in the changed scenario, as it depends on the duration of the ban. However, we have a contingency plan ready,” another SpiceJet executive said, adding that the airline is going to wet lease two Boeing 737s in the next 20 days.
SpiceJet has also been forced to cut flights on at least 12 international routes.
Indian Civil Aviation Secretary Pradeep Singh Kharola said the airline will cancel around 40 flights from Thursday. He added that SpiceJet had been asked to not cut flights to a city that would make it unconnected.
Experts say other airlines will also demand compensation because plane groundings are pricey.
“This is costing millions of dollars per day,” Phil Seymour, who runs an aviation consultancy called IBA said.
Analyst at Morningstar Chris Higgins added that “Typically, once an airline takes the aircraft, Boeing makes some guarantees in terms of the performance of that aircraft, and one of them is that the aircraft should be airworthy.”
In 2013, Boeing paid an undisclosed amount to airlines affected by a three-month grounding of its 787 Dreamliner jets after some of the planes’ batteries caught fire. The company said the cost of that grounding was “minimal.” However, only 50 Dreamliners were in service at that time compared with more than 350 of the 737 MAX planes of different configurations that have already been delivered to airlines around the world.