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American, United push back 737 MAX return amid new approval delays

Stock MarketsFeb 14, 2020 06:25PM ET
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© Reuters. An American Airlines airplane sits on the tarmac at LAX in Los Angeles

By Tracy Rucinski and David Shepardson

CHICAGO/WASHINGTON (Reuters) - American Airlines Group Inc (O:AAL) and United Airlines Holdings Inc (O:UAL) are pushing back the return of Boeing (NYSE:BA) 737 MAX flights until August and September, respectively, a fresh delay that comes after sources told Reuters that the timing of a key certification flight may not occur until at least April.

American is cancelling 737 MAX flights until Aug. 18 and United until Sept. 4, the two said in separate statements on Friday. The other U.S. 737 MAX operator, Southwest Airlines Co (N:LUV), has extended its flight cancellations until Aug. 10.

The new timelines mean that the three carriers will be flying without the 737 MAX for the second straight U.S. summer, an issue that hit their profits during last year's peak travel season.

Boeing's 737 MAX was grounded worldwide last March after two crashes in Indonesia and Ethiopia that killed 346 people.

The U.S. planemaker has spent months updating software believed to have played a role in both crashes, but fresh issues have surfaced, complicating regulators' efforts to reapprove the plane.

The timing of a certification flight, a key step in the approval process, has been delayed repeatedly. The latest unofficial guidance was for the flight to happen this month, but now it is unlikely to occur while Boeing tries to resolve the new problems, sources said this week.

American, Southwest and United had been planning to fly the jets in early June if regulators had approved the plane in the first quarter, but that now looks unlikely.

One key issue yet to be resolved is whether Boeing must separate two wiring bundles that may be too close together, which could lead to a short circuit and crash if pilots do not respond appropriately.

Boeing has told the U.S. Federal Aviation Administration it does not believe it needs to separate wiring bundles, people familiar with the matter said on Friday.

Once regulators approve Boeing's fixes, airlines will still need around 30 days or longer to prepare their fleets and pilots before using the planes for commercial flight.

The longer the 737 MAX is grounded, the more Boeing will ultimately have to compensate its customers.

Boeing spent $1.4 billion on compensation for 737 MAX customers last year and Chief Financial Officer Greg Smith said this week the company expects "a good portion" of additional settlements to take place this year.

Meanwhile, carriers including Delta Air Lines (N:DAL) that do not operate the 737 MAX are picking up travel demand that United, Southwest and American have been unable to meet given their reduced fleets.

American, United push back 737 MAX return amid new approval delays
 

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