Boeing 737 Max Grounding Takes Toll On Airlines And Passengers

Jul 29, 2019
Originally published on July 30, 2019 2:00 pm

When Nancy Dunne goes to see her family outside Chicago, she likes to fly Southwest Airlines from Newark Liberty International Airport near her home in Maplewood, N.J.

Starting in November, she'll need to make alternate arrangements.

Last week, Southwest announced it would no longer fly to Newark. The grounding of the Boeing 737 Max after two deadly crashes in Ethiopia and Indonesia has caused the airline to cancel flights and consolidate routes into places such as Newark, which are less profitable.

"For me this is really a big thing. I'll figure something out. Maybe it's time for me to move back to Chicago," Dunne says with a laugh, as she stands near the airport's Southwest counter.

When the 737 Max was grounded last March, carriers around the world were forced to adjust suddenly, canceling thousands of flights and delaying the retirement of some older planes.

Now, the impact of the 737 Max grounding on airlines and their passengers is becoming more clear: smaller profits and more crowded planes. Many U.S. and international airlines that relied on Boeing's bestselling plane have had to cancel thousands of flights.

"Obviously it was a shock to everybody in the industry," says airline analyst Richard Aboulafia. "But of course this has grown significantly as a problem over the past few months."

In recent days, airlines have begun releasing their earnings reports for the second quarter, and some major carriers have taken a big hit.

No longer able to use their 737 Maxes, airlines have reduced the number of routes they serve. American Airlines has canceled 115 flights per day, potentially affecting about 23,000 passengers daily.

Foreign carriers have been hit as well. Flydubai, a low-cost Middle East airline serving 95 destinations, has canceled 17% of its flying schedule. European budget airline Ryanair warned Monday that it may have to lay off employees because of the grounding.

With so many cancellations, flights are naturally becoming more crowded. Southwest, which flies more 737 Maxes than any other U.S. carrier, said last week that the number of passengers per jet had risen during April, May and June.

"For customers, what people will notice compared with the same season of last year is the airplanes have become fuller," says Yi Gao, associate professor in the School of Aviation and Transportation Technology at Purdue University.

The cancellations are also having an impact on the airlines' bottom lines. Southwest said the grounding had reduced its second-quarter profit by $175 million.

Boeing has set aside nearly $5 billion for losses tied to the grounding, and some part of that will go toward compensating the airlines for their losses. But how much it will pay is to be negotiated individually.

Fortunately, these are good times for the airline industry, with heavy demand for seats, and airlines such as Southwest are still making money.

"At the moment the U.S. economy is strong, so people are traveling. No matter [if it's] business persons or leisure travelers, they're all traveling," Gao says.

But the longer the grounding goes on, the more precarious each airline's positions will be.

Aboulafia notes that the 737 Max is part of a new generation of planes that were supposed to be much more fuel efficient than their predecessors. Being forced to use older planes will make operations more costly, he says.

"Increasingly, there are other airlines that have new-generation Airbus jets, and they're at a competitive advantage" in terms of efficiency, he says.

That's bad news for carriers like American, United and Southwest that rely on the 737 Max, and good news for those — such as Delta Air Lines — that don't.

And right now, no one can say for sure when the 737 Maxes will be back in the air. While Boeing hopes to get them flying by October, the 737 Max's fate remains in the hands of regulators.

Copyright 2019 NPR. To see more, visit https://www.npr.org.

AUDIE CORNISH, HOST:

When regulators grounded the Boeing 737 Max plane back in March following two fatal crashes, airlines everywhere had to adjust. They canceled thousands of flights. They took some older planes out of mothballs. And now months later, it's become clear just how big of a change this has been for both the industry and passengers. NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: Southwest Airlines never flew very many planes in and out of Newark Liberty Airport. It's a United hub. But Southwest has its fans in the area - people such as Nancy Dunne of Maplewood, N.J., who regularly takes it to see her parents in Chicago. So when Southwest said the 737 Max grounding would force it to cancel all service to Newark last week, Dunne was bereft.

NANCY DUNNE: For me, this is really a big thing. I'll figure something out. Maybe it's time for me to move back to Chicago.

ZARROLI: Dunne has a ticket to go home for Thanksgiving, but Southwest won't be flying from Newark by then. The 737 Max is Boeing's top seller, and Southwest flies more of them than any other U.S. carrier. American and United also fly the plane, and they also had to cancel flights when regulators took the plane out of service.

RICHARD ABOULAFIA: Obviously, it was a shock to everybody in the industry.

ZARROLI: Airline analyst Richard Aboulafia says for a while after the grounding, airlines were able to make due, in part by using older planes.

ABOULAFIA: But, of course, this has the grown significantly as a problem over the past few months.

ZARROLI: Just how much of a problem has become clearer in recent days. American said it has been forced to cancel 115 flights per day through November. Because the 737 Max carries 200 passengers, the cancellations potentially affect 23,000 people every day.

Over in the Middle East, the airline flydubai said it was cancelling up to 15 flights a day back in March. And Singapore Airlines says capacity on its budget carrier will drop 3% in the coming year.

With so many cancellations, planes are naturally becoming more crowded. Southwest in particular says it's flying more passengers on each jet. Yi Gao is a professor of aviation technology at Purdue.

YI GAO: For customers, what people will notice is that compared with the same season of last year is the airplanes have become fuller.

ZARROLI: Southwest also said last week that the grounding cost it $175 million in earnings during April, May and June. Boeing will compensate the airlines for at least part of the money they've lost. But how much they'll get has to be negotiated. Fortunately, Gao says, this is a really good time for the industry.

GAO: At the moment, the U.S. economy is strong. So people are traveling. No matter business person or it's the leisure travelers, they're all traveling.

ZARROLI: So even with the 737 Max out of service, airlines like Southwest are still making good money. But Richard Aboulafia says airlines such as Southwest also face a problem. The 737 Max was part of a new generation of planes that were supposed to use less fuel.

ABOULAFIA: Increasingly, there are other airlines that have new generation Airbus jets, and they're at a competitive advantage in terms of fuel burn and efficiency relative to people who are stuck operating older equipment because the new stuff isn't coming online.

ZARROLI: The longer the grounding goes on, the more expensive it gets for airlines that plan to rely on the 737 Max and the better it gets for airlines such as Delta that don't. And right now no one can say for sure when the plane will be flying again. Boeing says it hopes to get the plane in the air by October but also says it could end up taking longer than that.

Jim Zarroli, NPR News, New York.

(SOUNDBITE OF ORSTEN SONG, "FLEUR BLANCHE") Transcript provided by NPR, Copyright NPR.