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Mar 29, 2019

World News | Cost of Boeing groundings rises as TUI takes $200 million-plus hit.

Georgina Prodhan



FRANKFURT/WASHINGTON (Reuters) - Anglo-German tour operator TUI became the latest Boeing 737 MAX operator to warn of a hit to its profits as the U.S. planemaker moved to restore confidence in its best-selling model after two fatal crashes that have grounded the planes worldwide.
TUI said it was planning for the planes to remain grounded until at least the middle of July, costing it upwards of 200 million euros ($224 million) in core profit, with “considerable uncertainty” about when the 737 MAX would return to service.
Boeing hopes a software fix that it plans to introduce may address a problem common to both accidents that killed a total of 346 people, as investigators into the two accidents focus on new anti-stall software known as MCAS.
Investigators looking into the March 10 Ethiopian Airlines crash have reached a preliminary conclusion that the anti-stall system was activated before the plane hit the ground, the Wall Street Journal said, citing people briefed on the matter.
Ethiopian investigators have not yet published any report and there is no proven link between the Ethiopian crash in which 157 people died and October’s accident that killed 189 in Indonesia.
But a preliminary report is expected as early as next week and U.S. safety investigators have reviewed data from the “black boxes” that were aboard Ethiopian Airlines Flight 302, four people briefed on the investigation told Reuters.
The amount and quality of training that Boeing and airlines provided to 737 MAX pilots is one of the issues under scrutiny as investigators around the world try to determine the causes of the two 737 MAX crashes within five months.
The U.S. Department of Justice is investigating Boeing’s development process and what Boeing disclosed about MCAS.
On Thursday, a lawsuit against Boeing was filed in Chicago federal court by the family of Jackson Musoni, a citizen of Rwanda, who died in the Ethiopian Airlines crash.
The lawsuit alleges that Boeing had defectively designed the automated flight control system. Boeing said it could not comment on the lawsuit.

GROUNDINGS

Reuters reported on Friday that U.S. and European regulators knew at least two years before the Indonesian crash that the usual method for controlling the 737 MAX’s nose angle might not work in conditions similar to those in the two recent disasters, citing a document.
The European Aviation and Space Agency (EASA) certified the plane as safe in part because it said additional procedures and training would “clearly explain” to pilots the “unusual” situations in which they would need to manipulate a rarely used manual wheel to control, or “trim,” the plane’s angle.
Those situations, however, were not listed in the flight manual, according to a copy from American Airlines seen by Reuters. Boeing declined to comment on the EASA document.
Boeing’s fastest-selling, fuel-efficient 737 MAX jet, with orders worth more than $500 billion at list prices, was grounded globally by the U.S. Federal Aviation Administration (FAA) and other regulators in the wake of the second crash.
TUI said on Friday that with no dates yet announced by Boeing for modifications of the aircraft, nor for approval of those changes by U.S. and European regulators, it was currently planning for the grounding to last until mid-July.
Other flight operators including Southwest Airlines - the world’s biggest operator of 737 MAXs - United Airlines and Air Canada have also warned of hits to their business from the grounding of the planes.
TUI, which has 15 737 MAXs representing 10 percent of its fleet, said extra costs would include replacement aircraft, higher fuel costs, other disruption and negative trading impact, sending its shares down by around 10 percent.
“Should it not become clear within the coming weeks that flying the 737 MAX will resume by mid-July, TUI will need to extend the above-mentioned measures until the end of the summer season,” hitting profits by another 100 million euros, it said.
FILE PHOTO: Airplane engine parts are seen at the scene of the Ethiopian Airlines Flight ET 302 plane crash, near the town of Bishoftu, southeast of Addis Ababa, Ethiopia March 11, 2019. REUTERS/Tiksa Negeri/File Photo
Morningstar analyst Chris Higgins on Thursday reduced his estimate for how long the groundings would last to two months from three, based on details presented by Boeing of its proposed fix to the MCAS software.
“We’ve revised our base-case timeline for the groundings to around two months because this MCAS fix appears mature, the MCAS upgrade should only take one hour per plane, and the updates will not require significant training,” he wrote in a note.
Reporting by David Shephardson in Washington; additional reporting by Eric M. Johnson in Seattle, Alwyn Scott and Allison Lampert in New York and Jamie Freed in Singapore; Editing by Simon Cameron-Moore/Keith Weir

Source: Reuters

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