By Doug Cameron and Alison Sider
American Airlines Group Inc. said it expects Boeing Co.'s 737
MAX will remain out of service until January, the latest example of
how the grounded plane continues to create additional costs and
logistical burdens for carriers and passengers.
The global fleet of MAX jets was projected to be near 1,000 by
the end of this year, based on Boeing's production plans, before it
was grounded in March following two fatal crashes.
Now carriers that fly the MAX are paying millions of dollars to
maintain grounded planes and adjust their operations as the
suspension continues. Analysts estimate some three million
passengers will have experienced some disruption to their travels
if the fleet remains grounded through year's end.
American said Wednesday that it expects to have the MAX back in
service on Jan. 16, more than a month beyond its previous
projection. United Airlines Holdings Inc. still has the MAX on its
schedule from December.
Some carriers are removing the aircraft from bookings next
summer in case the global MAX fleet remains depleted. Industry
leaders including Ryanair Holdings PLC Chief Executive Officer
Michael O'Leary have said the move would likely result in higher
fares during that peak period.
Airlines have filled around half the lost capacity by renting
planes and deferring the retirement of older aircraft. The
remaining capacity crunch helped push the percentage of seats
filled on flights world-wide to all-time highs in July and August,
according to the International Air Transport Association. More
passengers are being turned away from overbooked aircraft.
Carriers are paying to rebook passengers and pay idle flight
crews while they lose profits from canceled flights. Some analysts
estimated the daily costs associated with each grounded MAX ran as
high as $150,000 for some carriers, which included renting
replacement jets, finance costs on grounded planes, crew expenses
and accommodations made to passengers.
The grounding of the MAX has coincided with other operational
problems for big carriers, such as a dispute with mechanics that
American said has forced the cancellation of hundreds of flights.
Southwest Airlines Co. said the lack of planes helped hasten its
decision to stop operations at Newark Liberty International
Airport, where it had struggled to make money.
Some of the capacity crunch from the MAX's grounding is being
offset by the first tempering of passenger and cargo demand in
years. Passenger traffic rose 3.6% in July from a year earlier,
half its average pace over the past two years, as cooling economic
growth and trade tensions weighed on the industry. Had demand
growth kept pace with past years, some analysts said, fares likely
would have climbed higher.
Boeing has set aside an initial $5.6 billion to compensate
customers for grounded and undelivered jets. The aerospace giant
has said it expects the MAX to be approved by regulators to fly
again in the fourth quarter, if it secures regulatory clearance in
the next several weeks.
Disagreements between U.S. and European air-safety regulators
over portions of proposed fixes to the MAX's flight-control systems
could result in more delays before the plane is cleared to fly, The
Wall Street Journal reported Tuesday.
Vasu Raja, American's vice president of network and schedule
planning, said the grounding has been one of the most complex
scheduling problems of the past two decades. American had 24 of the
jets in March and had expected 16 more to arrive by year-end.
The airline has adjusted its schedule more than half a dozen
times since the MAX was grounded in March. The carrier has added
staff at customer service centers to handle calls from passengers
checking to see whether their flights have been affected.
American said it would work to minimize the impact on travelers
over the holidays.
Some travelers have already had trips upended by the MAX's
absence.
Frank Muto booked his family's late October trip to Disney World
last spring. In July, Southwest sent an email telling him that the
family's return flight had been canceled, and that the only other
nonstop option departed six hours earlier than they had planned.
That meant his family would miss most of their last day at the
resort, which they had already paid for. He said customer service
agents told him the change was because of the MAX grounding.
"Boeing gave them an inferior product, and who's hurting? All
the customers," Mr. Muto said. He canceled his return flight and
booked one-way tickets on an American flight back home to
Philadelphia.
A Southwest spokesman said the airline has tried to find
acceptable alternatives for as many passengers as possible as it
has trimmed its schedule to reflect its reduced fleet.
Some U.S. MAX operators have rejiggered flights rather than hire
replacement planes, contributing to a rise in denied boardings. The
level of denied boardings climbed more than 15-fold at American in
the second quarter from a year earlier, with the carrier hobbled by
the grounding as well as the dispute with its mechanics. The metric
more than doubled at Southwest, the largest MAX operator, citing
the grounding.
American said Wednesday that the grounding canceled 9,475
flights in the third quarter and sliced $140 million from pretax
profits. Southwest had said there would be a $175 million impact in
its second quarter. Both have said their costs would climb as the
delivery date for dozens of more jets they have ordered is pushed
back.
Icelandair Group Hf in September said it reached a deal with
Boeing to cover "a fraction" of what it said amounted to $140
million in costs so far for grounding its six MAX jets and delays
to the delivery of another 10. South Africa's Comair Ltd. said the
grounding of its single MAX cost it $13 million through
September.
Southwest, like other carriers, is talking with Boeing about a
possible settlement to cover costs from the grounding.
The airline's pilots have said the grounding has cost them money
because of fewer flying opportunities. Their union has sued Boeing,
seeking compensation of more than $100 million. Southwest CEO Gary
Kelly told employees last month that the airline is looking to
share the proceeds of any deal.
Write to Doug Cameron at doug.cameron@wsj.com and Alison Sider
at alison.sider@wsj.com
(END) Dow Jones Newswires
October 09, 2019 08:57 ET (12:57 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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