Boeing’s decision to halt Max 8 production, a major setback for SpiceJet

Aerospace manufacturer Boeing’s decision to temporarily halt the production of its Boeing 737 MAX 8 aircraft is a major setback for SpiceJet, which is the only Indian airline to have 13 of these type of aircraft in its fleet out of a total 205 on order.

Late on Monday, Boeing announced its decision to “temporarily suspend production on the 737 programme beginning next month.” It attributed the decision to “extension of certification into 2020, the uncertainty about the timing and conditions of return to service and global training approvals.”

SpiceJet’s 13 737 MAX-8s out of a fleet of 118 aircraft remain grounded since a global ban following the Ethiopian Airlines crash in March. Along with Lion Air crash, the two accidents together killed more than 300 passengers and crew members. However, over the next six months the airline was able to induct 37 planes from Jet Airways grounded fleet.

“Boeing suspending production of the MAX does not impact SpiceJet’s current operations in any manner. We are presently working with Boeing Company on the return to service and is in accordance with the guidance provided by the Boeing Company,” the airline said in a statement. While the airline would like to maintain a stoic silence, in reality it is faced with some serious challenges. United Airlines along with American and Southwest have already cancelled their schedule for 737 MAX operations until March indicating that global carriers expect FAA certification will take a few more months. According to media reports citing an FAA official, the certification will extend into next year.

The biggest loss for the airline will be in terms of fuel savings and higher yields promised by 737 MAXs. SpiceJet’s international plans may also go for a toss, until it is able to find a suitable replacement for the 737 MAX 8. The first option is to ask Boeing to offer an alternative, such as the Boeing 737 NG and drive a hard bargain for compensation for MAXs. The second option is to switch its loyalty and go to competitor Airbus for its A320 Neo planes, which are of comparable range. But, these planes may not be readily available as plane makers have a delivery schedule for their existing customers. Alternatively, the Indian low-cost carrier may go to a lessor to induct planes on rent, but industry sources explain that will be an uphill task too. “Leasing will prove to be an expensive option as leasing costs have gone up due to a surge in demand from MAX customers globally,” explain industry sources.

The Indian low-cost carrier will will simultaneously look at extending the leases on its older 737-NGs in the fleet.

The inability to get a plane that fits the right criteria will impact SpiceJet’s international expansion plans to countries it can serve with MAX. This could cost the airline at a time its competitors like IndiGo and Vistara are expanding overseas, including to far-flung destinations such as London and Tokyo.

But this may also be “a blessing in disguise” for the airline as well as the domestic sector, an executive of an international airline asserted. The uncertainty over MAXs will delay new capacity into India, allowing all carriers to improve their yields or average fare per mile. “This is an opportunity for the airline to forget about market share and focus on improving the quality of its service, consolidate what it has and make sure that it is profitable and can continue to survive,” he added on the condition of anonymity.

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Printable version | Feb 22, 2020 1:45:01 PM |

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