The Strategist

Boeing takes on compensations for 737 MAX

09/23/2019 - 12:00

Icelandic air carrier Icelandair has become one of the first airlines to agree with Boeing on compensation for the suspension of 737 MAX aircraft operation. Similar negotiations with many other airlines are also underway. According to experts, the costs of downtime of 737 MAX, whose flights which have not yet been resumed, has already reached $ 9 billion.

Phillip Capper
Phillip Capper
Icelandic Icelandair said it has been able to negotiate with Boeing to compensate for the downtime of its 737 MAX aircraft. Icelandair has six such aircraft, whose flights worldwide have been suspended since March, after the crash of the Boeing 737 MAX in Indonesia. The amount of compensation has not been reported yet. Icelandair says the negative impact of downtime on airline profits before taxes on August, 1 was about € 140 million and "has grown in recent months, as the suspension of operations continues to this day." According to the company’s estimates, the negative impact of downtime is now € 135 million, given the compensation that Boeing should pay.

Icelandair is one of the first airlines to come to an agreement with Boeing regarding compensation, despite the fact that many airlines are conducting such negotiations. Also this week, Ryanair, an Irish low-cost airline, announced that it had stopped paying Boeing for its 737 MAX and had begun negotiations with the aircraft manufacturer about compensation for downtime. Ryanair ordered 135 737 MAX aircraft, some of which should be delivered this year, and by the summer of 2020, the airline should already have 58 such aircraft.

In July, it was reported that Boeing allocated $ 5.6 billion for potential compensation to customers due to the suspension of the 737 MAX. According to estimates by the consulting company IBA Group, which specializes in the aviation sector, the downtime of a single 737 MAX aircraft costs about $ 150 thousand per day. Thus, the total amount of costs reaches $ 9 billion. Flights have not yet been resumed and, according to experts, are unlikely to start earlier than the end of this year, or, possibly the spring of next year.