Dubai Airshow

Middle East Carriers Feel Pain of Max Hold-Up

 - November 13, 2019, 3:00 AM
With tens of billions of dollars in orders, Middle East airlines are losing patience with the prolonged grounding of Boeing’s Max family.

With almost 400 orders for the Boeing 737 Max on hold in the Middle East, regional patience is running thin. Saudi Arabia’s Flyadeal became the first major regional LCC to cancel orders, for 30 737 Max-8s, in July, after parent Saudi Arabian Airlines upped an order for Airbus aircraft to 100, including 30 Flyadeal A320neos, at June’s Paris Air Show.

After signing for 225 Boeing 737 Maxes worth $27 billion at Dubai Airshow 2017, Flydubai, the Middle East’s biggest 737 operator, was clearly impacted by the grounding. It reported a 2019 first-half loss of $53.6 million, 38 percent down on the previous first half. While revenues held stable, available seat kilometers fell 14.9 percent, and passenger numbers dropped 7.5 percent to 5 million.

“Without any deliveries of new aircraft and no visibility of the timelines, we will see our operating fleet reduce in size to what it was in 2014,” said Flydubai CEO, Ghaith Al Ghaith. “This is disappointing. If the grounding continues until the end of the year, we expect our performance to continue to be impacted.”

News was not all bad. Adel Ali, CEO of UAE-based Air Arabia, confirmed to AIN in October the company wished to proceed with an order for 100 new aircraft within the coming 12 months and could choose either the Boeing 737 Max or the A320 family. To date, Air Arabia has operated an Airbus-only fleet, as also has other major Saudi LCC, Flynas.

The return to service of the Max remains a global issue. Peter Morris, chief economist at UK-based Ascend by Cirium, was pessimistic about its return to service. “[Given] the various kinds of dominoes that need to go down, my personal feeling, and it's not based on any inside knowledge whatever, is that I will be surprised if it was on a huge scale before March next year,” he told AIN in Dubai. “There are other people saying it's going to be November, so we're clearly at a disagreement.

“I just see two elements that come in. One is the approval of EASA and the Chinese, as a minimum. Maybe the Canadians are going to be another group, as well. I can't see that just being an automatic process in the way it has in the past, no matter what kind of agreements and behind-the-scenes negotiations [have] been going on. The other [is that] I find it difficult to believe that there won't be pilot training issues; I hear whispers that there [is] talk of pilot training being required.”

There were a lot of wildcards and complications regarding return to service, Mike Stengel, senior associate at Ann Arbor, Michigan-based AeroDynamic Advisory told AIN. “First, although the aircraft have not been flying, there are still some calendar-driven maintenance events that may have to be completed, and it would not be surprising if there are some unexpected issues that technicians discover as a result of the aircraft sitting idle for what would be around nine months at the end of 2019.”

He cited April 2019 data from Boeing to show just over 5,000 outstanding Max orders, with 387 delivered. Asia-Pacific operators accounted for 23 percent of orders, North America 14 percent, Europe 10 percent, South America 6 percent, the Middle East 5 percent, and Africa 1 percent.

“Second, it is not yet clear what requirements EASA will impose as conditions of the Max returning to service, or if they will accept the same requirements as the FAA. If, for example, EASA ends up requiring more [extensive simulator training], then there could potentially be a chokepoint, since there are relatively few Max simulators that would be handling a wave of pilots.”

However, he said this could be mitigated if the additional training could be completed during routine recurrent training, which most pilots undergo every six to nine months.

Third, it was unclear whether the Civil Aviation Authority of China (CAAC), would streamline the Max’s return to service, given Sino-U.S. trade tensions. “On one hand, Chinese carriers account for a significant share of the Max backlog and need the aircraft to support their growth plans,” he said. “On the other, the Chinese government may want to leverage the Max as a bargaining chip with the U.S.”