Air Canada is one of the most impacted airlines in the world by Boeing 737 MAX grounding

Aug 7 2019, 3:37 pm

Flight cancellations and smaller replacement aircraft placed into service for airline itineraries that were scheduled to be Boeing 737 MAX flights have resulted in a reduction in capacity around the world.

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A new analysis by global air travel data firm OAG compares mid-February scheduled capacities, prior to the grounding of the problematic aircraft in March, with the latest scheduled in early August and it found a 41 million seat capacity reduction.

The capacity loss difference also comes during the peak summer season, when many airlines typically increase their capacity, including the operation of additional seasonal flights.

“For every carrier there appears to be a significant reduction in capacity offered, much of which would have been assumed in the original planning of the carriers for this financial year,” wrote John Grant, the executive vice-president of OAG.

“Last minute schedule adjustments are we know challenging for any carrier, but the scale of the B737 MAX grounding has been very disruptive for many.”

Of all the airlines that operate Boeing 737 MAX, China Southern Airlines was hit hardest with a loss of more than 3.6 million seats, followed by Air Canada with 3.3 million seats, Southwest Airlines with 2.96 million seats, and American Airlines with 2.19 million seats.

Of North America’s five major airlines that use the aircraft, about 11 million seats have been dropped from sales compared to the schedules filed in the middle of February, which is also typically a slower time of the year for air travel.

“Many carriers have of course made operational adjustments, continued to operate aircraft with perhaps lower levels of capacity and incurred significant additional cost as part of that recovery programme,” he continued.

“Accountants will, of course, be keeping a very close eye on every expense incurred as a result of the grounding as they prepare a series of claims for the inconvenience caused.”

It is estimated the loss airline capacity around the world may cost airlines USD$4 billion, based on a November service reintroduction, but this timeline is increasingly unlikely.

Impact of Boeing 737 MAX grounding, as of August 2019. (OAG)

Impact of Boeing 737 MAX grounding, as of August 2019. (OAG)

According to CNBC, as of late July, Boeing believes it can conduct final certification flights with regulators in September, allowing the Boeing 737 MAX to return to commercial service as early as October.

Currently, most airlines have cancelled the use of the aircraft on their flights through the end of October, but this could be further extended if regulators deem that Boeing’s fixes are unsatisfactory.

Last week, Air Canada announced it is extending its grounding of the Boeing 737 MAX until at least January 2020 due to the uncertainty over the timing of regulatory approvals.

Up until the grounding, Air Canada was using 24 of the Boeing 737 MAX 8 aircraft, accounting for 20% of its narrow-body fleet, carrying close to 12,000 passengers daily. As a result of the grounding, the airline has resorted to leasing Airbus A320 and Embraer 190s aircraft used by other carriers and cutting routes.

It originally anticipated seeing capacity increases from 12 additional Boeing 737 MAX 8 aircraft through the middle of 2019 and 14 more aircraft during the first two quarters of 2020.

After several years of consecutive year-over-year upswing growth, the global airline industry was originally forecast to see a USD$28 billion profit in 2019, but that now seems highly unlikely.

Impact of Boeing 737 MAX grounding, as of August 2019. (OAG)

Impact of Boeing 737 MAX grounding, as of August 2019. (OAG)

Kenneth ChanKenneth Chan

+ Venture