Boeing 737 MAX : Planemaker to supply 200 of the “Suicidal” aircraft to International Airlines Group (IAG), the sixth-largest airline group in the world ! www.boe.i.ng

U.S. Air Force aircraft Pegasus KC-46A by Boeing is displayed
during the 53rd International Paris Air Show, where the planemaker
got a surprising boost of confidence.

It takes a lot to shock the French. Yet Boeing managed it—and
more—at the 2019 Paris Air Show.

On Tuesday, after months of being on the back foot over the
worldwide grounding of its best-selling 737 MAX, the Chicago
planemaker revealed a secret deal to supply 200 of the troubled
aircraft to International Airlines Group (IAG), the sixth-largest
airline group in the world. Boeing stock rose more than 5% on the
news.

Traditionally, IAG has mainly flown Airbus on short-haul routes
and favored Boeing for long-haul, but in this instance CEO Willie
Walsh decided to make a change. The deal—currently based on a
signed letter of intent—involves supplying the 737 MAX to British
Airways, Iberia, Vueling, Aer Lingus, and Level, and is estimated
to be worth over $24 billion at list prices.

In terms of publicity, however, it’s priceless.

“That order was like manna from heaven for Boeing,” says
aviation expert John Strickland from JLS Consulting. “The Air Show
got off to a subdued start and people pretty much expected it to
continue in a low-profile way for Boeing, as they’d said before it
began that they would be engaging customers and discussing all the
issues surrounding the grounding of the MAX.”

“I don’t think anyone expected a big order from IAG,” he said.
“It’s a big confidence boost to Boeing at a time when they are
under considerable scrutiny and pressure.”

Question is, does it also represent a change in fortunes for
Boeing?

An urgent fix
Since the 737 MAX was grounded in March following two disasters in
four months, the planemaker has tried desperately to fix the
problematic flight control software that is thought to have
contributed to the deaths of 346 people in Ethiopia and
Indonesia—crashes that retired airline captain Chesley “Sully”
Sullenberger told Congress on Wednesday “should never have
happened.”

Speaking in Paris on Monday, Boeing’s head of commercial
aircraft Kevin McAllister apologized for the accidents. “I’ve been
in this industry for 30-plus years, and this is the most trying of
times,” he said. “It’s a time to capture learning. It’s a time to
be introspective, and it’s a time for us to make sure that
accidents like this never happen again.”

FRANCE-TRANSPORT-AVIATION-AIRSHOW-BOEING
Boeing Commercial Airplanes division CEO Kevin McAllister held a
press conference at the 2019 Paris Air show. (Photo by Eric
Piermont—AFP/Getty Images)
To help achieve this Boeing has reduced 737 MAX production from 52
to 42 planes per month, to allow its engineers to prioritize
software certification. As of April 11, Boeing had also made 96
flights to test its software update and, according to Boeing CEO
Dennis Muilenburg, the aircraft functioned as designed in all of
them.

Yet the planemaker hasn’t convinced the Federal Aviation
Authority (FAA) to allow the 737 MAX to return to the skies. On
June 2, the FAA also identified further problems with both the 737
MAX and the 737 NG that preceded it, citing improperly manufactured
parts. This led to the postponement of a $1 billion order from
Azerbaijan airline AZAL for 10 planes.

The simple truth is that despite Boeing’s round-the-clock
efforts, nobody knows quite when the 737 MAX will be seen taxiing
towards a commercial terminal. “If it is in the air by Christmas,
I’ll be surprised,” Tim Clark, the president of Emirates, told
reporters in Seoul on June 2.

Extra-long range competition
Boeing’s problems don’t end there either. The shock IAG
announcement followed Monday’s high-profile launch of the new
Airbus A321XLR (literally, Extra Long Range)—a versatile,
narrow-body jet that’s capable of flying 4,600 to 5,400 miles with
a 30% less fuel-burn per seat, giving it the range to economically
hop the Atlantic or fly non-stop from New York to Los Angeles.

Since Monday, the XLR has won over 200 orders, including 50 from
American Airlines and 13 from New York-based JetBlue. Other
customers include International Leasing Corp, Middle East Airlines,
and Qantas.

A computer rendering of the A321XLR that Airbus unveiled at the
Paris Air Show on Monday. (Photo courtesy of Airbus)

On Thursday, Airbus commercial chief, Christian Scherer, said
the European air giant would use the XLR in a counter bid to
Boeing’s surprise IAG deal. “We are taking the position that we
would like to bid for this business,” Scherer told a press
conference in Paris.

Deepening the problem, Boeing currently has no feasible response
to the XLR either. It’s much-vaunted New Mid-market Airplane (NMA),
is yet to be revealed, while it hasn’t developed a successor to the
capable and versatile 757, which is directly threatened by the
XLR.

Add to this the fact that Boeing is also suffering teething
problems with its long-haul 777X, which hasn’t flown because of
difficulties with its GE Aviation engines, and it’s easy to see
that Boeing has a lot on its plate. To say the least.

“There had been an expectation that the 777X might have flown at
the Paris Air Show and maybe new orders would have been announced,
but neither thing happened,” says Strickland.

Aviation analyst Chris Tarry adds, “You are going to hear loads
of comment saying ‘Wait until we bring in the NMA. It will do
everything you want.’ But if you’re an airline and you need the
capacity now, or you want the capacity now, then the Airbus is
already available.

“Put simply: Airbus has a plane to replace the Boeing 757.
Boeing doesn’t,” he said.

A likely comeback
Yet it’s not all doom and gloom for Boeing. While IAG is likely to
have picked up their 200 airlines at a knockdown price, the simple
fact is that Boeing remains one of the world’s two big
aero-manufacturers and has a huge backlog of orders—the long-haul
787 Dreamliner alone recorded 1,440 orders through May 2019.

“The reality is that Boeing will get it fixed. There’s no
doubt,” said Tarry. “The 737 MAX will come back into service, it
will successfully operate across the globe and people will
ultimately forget all about this.”

That still doesn’t minimize the importance of the Paris
announcement, however.

“We’re partnering with the Boeing brand,” IAG’s Walsh said in
support of the deal. “That’s the brand that I’m doing business
with. That’s the brand that I’ve worked with for years. And it’s a
brand that I trust.”

Sitting beside him, a beaming McAllister said, “We can’t thank
you enough for the confidence you place in the 737 MAX family, and
in all of us.”