Remember the good old days when we could just talk about how incompetent Boeing was and get collectively angry that the MAX still hadn’t returned to service?
That was a month ago.
Things couldn’t be any more different right now. Oh sure, we can still talk about how incompetent Boeing is, but the MAX grounding isn’t top of mind for anyone, not even Boeing. In fact, plunging demand means airlines are thrilled that the company still hasn’t been able to get the airplane back in the air. If they can’t get the airplane delivered, they don’t have to pay for it.
In other words, to repurpose a horribly-racist (mis)quote attributed to General Philip Sheridan:
Think about Southwest. That airline should have had more than 70 MAX airplanes flying by the end of 2019 and more than 100 by the end of this year. None are flying today. This was an enormous problem, to the point that in the airline’s 2019 10-K filing, it put this as a risk factor:
Boeing no longer manufactures versions of the 737 other than the 737 MAX family of aircraft. If the 737 MAX aircraft were to remain unavailable for the Company’s flight operations, the Company’s growth would be restricted unless and until it could procure and operate other types of aircraft from Boeing or another manufacturer, seller, or lessor, and the Company’s operations would be materially adversely affected.
Growth being restricted? This coronavirus laughs at your suggestion, Southwest. Now, the risk factor should read something like:
If Boeing actually gets the MAX flying again and starts delivering the airplanes, the Company will be forced to pay for those airplanes. Were that to happen, the Company’s finances would be materially adversely affected.
Southwest isn’t alone in this boat, of course. All of the big guys in the US save Delta have MAXs on order and would most assuredly be thrilled to not have to take them right now. Of course, this isn’t limited to the MAX in terms of airline desire. The last thing an airline wants is to take delivery of ANY new airplane right now. For the MAX, that’s easy. For others, not so much.
In a week when American announced it would ground more than 130 of its widebody airplanes, it actually took delivery of one, a 787, from Boeing. The airline can’t just walk away because times are tough.
This brings me to a great bailout solution for the airlines. When’s the last time you heard about the FAA working to get the 737 MAX back in the air? It’s been awhile. If the FAA just says it won’t certify the MAX for a year, then the airlines get a huge benefit. Ok, ok, it’s not enough to actually match the $58 billion that the airlines collectively say they need, but hey, it could be part of a package. Or not.
Of course, then Boeing would have more reason to ask for a bailout. To be clear, it has already done that. It wants $60 billion for aerospace companies, mostly in loan guarantees, and mostly for itself. That’s a bold ask for a company that has done nothing but shoot itself in the foot time and time again over the last couple of years.
The MAX fiasco has put Boeing up at the top of the “easy to hate” list of companies. If that were a list put out by Capitalism Sucks magazine, then it wouldn’t be much of a concern. But there isn’t a lot of love for Boeing out there from anyone right now. You would think it would get positive press for having its CEO and board chair walk away from their salaries, but instead, it gets coverage like this:
If there’s one thing that Boeing has going for it right now, it’s that it falls squarely into the despised “too big to fail” category of companies. It is hugely important to the American economy both from an employment and a trade perspective. So what can be done?
The bailout discussions have been ongoing, and it’s entirely possible something may be announced before this post goes live despite an inability to come to an agreement in Congress when I wrote this yesterday. The most rational proposals I’ve seen floated are around the idea of supporting the economy instead of the company.
That means supporting workers and supporting trade/commerce by keeping the companies operating. It doesn’t mean supporting the owners of the company nor its creditors. Dilute them and give the people (via the government) a big old stake in Boeing at a cheap price. Then when the time comes to sell, the people make a lot of money. This is how the airline loan guarantees worked after 9/11 and it’s how the auto bailouts worked. This shouldn’t just apply to Boeing. It could and should apply to airline bailouts as well.
That all sounds well and good, but this is Boeing, and Boeing is exceedingly powerful. It wouldn’t shock me to see the company find a way to wiggle out of any responsibility at the top even though that’s where the problem has been since long before this coronavirus was even on anyone’s radar.
In the meantime, the airlines wait and hope that they don’t have to take any 737 MAXs anytime soon.
18 comments on “Reversal of Fortune: Airlines Suddenly Thrilled That the 737 MAX is Grounded”
I’m in no hurry to see the FrankenPlane return either.
While I think many of us had subconsciously started to write off the MAX, I wonder if we should start pouring one out for the NMA successor, the 777X, etc.
There will be airlines and airplane models fail. There will be a glut of airplanes on the market that will take years to unwind.
Although there is a huge difference in the level of irresponsibility between airlines, the notion that Boeing is too big to fail will not be enough to keep the stock of Boeing or any airline – or any other company that engaged in massive buybacks – to remain. There simply are too many small business owners and individual workers that will not allow the government to support stockholders when there is enormous need to support the basic livelihoods of workers and ensure that essential industries – but not necessarily every company in that industry – can survive.
Boeing possesses enormous design and manufacturing capabilities and the ability to boost the US economy. that should not be lost.
Unfortunately, they produced the MAX with all of its problems which Boeing management knew about, lied to the US government, and then has argued with the FAA at every step of the way to fix the problem. There might be anger at airlines but it doesn’t match the anger at Boeing.
A chapter 11 reorganization including wiping out stockholders and senior management and spinning off viable businesses in order for Boeing to restart its key manufacturing businesses may be necessary.
Boeing is the poster child for what was wrong in the last “up cycle” – since 2009. After one strategic failure after another, Boeing as a publicly traded company might well be replaced by one that is responsibly led and which can return to Boeing’s historically strong roots of designing and building world-class aviation products.
Your clearly clueless!
QUOTE: “If there’s one thing that Boeing has going for it right now, it’s that it falls squarely into the despised “too big to fail” category of companies. It is hugely important to the American economy both from an employment and a trade perspective. So what can be done?”-UNQUOTE
Simple. Shatter it. Forcibly break it up into two or more completely separate and disconnected new entities. If it’s too big to fail, it’s too big to exist.
We don’t need any more Aeroflots in our economy.
As I said last week, business as usual cannot apply here. This time, it;s the low and entry level workers that should get the lions share of aid/help. Not just whatever crumbs and scraps are left over as has traditionally been the case. Americans are out for blood now at the Corporate/Wall Street level. And any politician that does not support this view can expect to get slaughtered come his or her next re-election bid. Not only must we not reward reckless behavior, it’s equally important that the public does not *THINK* we did. Again, perception probably matters more than reality here.
So Congress will continue to kick it back and forth. Americans will starve en masse. And millionaires will now become billionaires as they take the aid for their “heroic” actions and lay off everyone anyway while pocketing the cash.
Applause Matt D & if that doesn’t work, BK it is.
‘Breaking it up’ works in some industries, but practically speaking how would it work with Boeing? I can’t really see creating ‘Boeing widebody’ and ‘Boeing narrowbody’ as separate companies.
Additionally, Boeing would be too big (actually too essential) to fail on account of its military and defense work alone.
Actually it’s passenger Vs non-passenger aircraft. That’s how you could break it up.
“passenger Vs non-passenger aircraft”
Assuming you meant “commercial aircraft”. You don’t need a company dedicated to making 77F, 76F etc….
Regardless, if you broke up Boeing you would very likely have 2 “too big to fail” companies.
As a famous boxer once said, “no max.”
Is anyone currently working on getting the MAX recertified, or is that mostly on hold?
Are MAX carriers going to be able to get Boeing to pay compensation for MAX aircraft already delivered that were grounded prior to covid-19? Or is Boeing just going to say “sorry, you wouldn’t have flown them anyway even if we hadn’t screwed up royally, so no soup for you.”
Oliver – I assume someone is working on it, but it can’t be a high priority. As for Boeing compensation, I have to think it would still apply unless they negotiate something to defer deliveries in exchange for relief.
“If that were a list put out by Capitalism Sucks magazine, then it wouldn’t be much of a concern.”
I have to admit I laughed a lot reading that sentence. Do you think Jacobin’s going to have a job opening for an aviation reporter anytime soon?
Same here. Amazing how so much could be said in so few words.
It’s easy to hate airlines, even though they generally deliver more value than any other service provider in the economy. It’s harder to hate an airline manufacturer — especially one that has manufactured airplanes that have safely delivered billions and billions of passengers – but Boeing managed to get themselves hated. I still think Boeing is more the victim of bad luck than truly bad management or engineering, but I’m sure others will disagree with me on this.
Count me as one of the people disagreeing with you. I work in the industry and the arrogance of Boeing has been apparent for the last several years.
Engineers are suppose to evaluate every scenario and plan accordingly and this is especially true in aviation. Fortunately, I see very little of the “take shortcuts to meet budget and schedule” in my company but this pretty much always is related to leadership pressure. Several of their actions, such as short cutting training requirements or making an “AOA disagree” light an extra-cost option are signs of leadership rot.
I don’t even know what I should call that plane anymore
The 737 MaxHubris, or the Screamliner
Lol at Screamliner. Ouch but funny!