B737 Max call-off triggers industry concern
Smaller carriers face disruption; suppliers fret
Published: Mar 13, 2019 07:18 PM

An American Airlines Boeing 737 Max 8, on a flight from Miami to New York City, prepares to land at LaGuardia Airport in the Queens borough of New York City on Monday. Photo: VCG

Wide-spreading bans on the Boeing 737 Max have triggered worries throughout the aviation industry, where insiders said the longer the suspension, the bigger the resulting losses.

More than 40 countries including Turkey, Germany and France have joined the ban on flying the Boeing 737 Max aircraft after two crashes within five months, showing a global rebellion against the US manufacturer's most popular plane.

Boeing shares sank 6.15 percent on Tuesday after losing 5.3 percent on Monday, wiping out billions in market capitalization.

"If the planes are grounded for more than one or two months, production may be affected, hurting Boeing's manufacturing subcontractors," Lin Zhijie, a veteran market watcher, told the Global Times on Wednesday, adding that deliveries of new aircraft could stop while the planes are grounded.

Chinese companies have participated in the production of almost all Boeing models, including the 737, 747, 767, 777 and 787 series. More than 35 Chinese companies are direct suppliers to Boeing, producing such components as the rear fuselage section and front boarding gates.

The 737 Max family reached a sales milestone in December 2018, passing 5,000 net orders with 181 new sales in December. For all of 2018, the 737 program achieved 675 net orders, including sales to 13 new customers, Boeing said in January. With a seven-year order backlog, the company increased production of the popular 737 in the middle of 2018 to 52 airplanes per month. Nearly half of the year's 580 deliveries were from the Max family, including the first Max 9 airplanes, Boeing said. 

"Grounding of a certain model can be quickly offset with other models for airlines that have large fleets, and it won't have much impact on operations. But for small airlines, a suspension of even one or two planes can disrupt the entire system," Zou Jianjun of the Civil Aviation Management Institute of China told the Global Times. "The longer the suspension, the more pressure the small airlines will suffer." 

An anonymous source at a Chinese airline told the Global Times on Tuesday that the grounding definitely will hurt the carrier's business, but it is hard to calculate the loss because it's unclear how long the suspension will last.

Chinese airlines operate about one-fourth of the world's 737 Max fleet, with 96 planes among 13 airlines. The top three carriers are China Southern Airlines with 24, Air China with 15 and Hainan Airlines with 11.

Also, many airline leasing companies that have large fleets of 737Max aircraft are under pressure. Most of the orders of 737 Max series aircraft have come from the world's major aviation leasing companies.

Five leasing firms in China, including ICBC Leasing and BOC Aviation, have Boeing 737 Max planes, some of which have been handed over to customers.

BOC Aviation said in December that it had delivered the final third of three Boeing 737 MAX 8 aircraft to Spicejet in India.