By Sepehr Archard | 20th December 2019
The news shocked most of the aviation industry weeks ago but, starting this month, Boeing will stop its 737-Max production following the Federal Aviation Administration’s decision to ground all of its new aircrafts. After thorough investigation, the manufacturer was deemed responsible for technical issues, due to a new auto-pilot system, which caused 3 of these commercial planes to crash, killing more than 300 people.
Making matters worse, Boeing still continued production while the investigation was in progress. Officials state that they were very confident that the planes will be re-certified to fly within months. However, perhaps more appropriate inventory management should have been considered, as the accumulation of 400 unauthorised planes in its warehouses has resulted in a roughly 20% increase in its inventory value, according to their most recent annual financial statements.
After the crisis hit the headlines, Boeing shares decreased by more than 20 pence from March to September last year. According to the financial times, US national GDP also took a pretty sizeable hit, falling by at least 0.5% since the beginning of the crisis with Boeing greatly impacting the nation’s economic prosperity.
Aviation experts are confident that the planes will be authorised to fly again later this year but, with trust seriously compromised, will airlines continue to buy from Boeing?
Unfortunately, this isn’t the first system failure witnessed on their aircrafts. A couple of months ago, British Airways, as well as Air New Zealand and Ethiopian Airlines, grounded their B787 Dreamliners because of engine failure. Customers may also start to favour other aircraft manufacturers, potentially decreasing revenue for airlines remaining loyal to Boeing.
According to a French newspaper, la Tribune, with all the problems Boeing has faced, Airbus has seized control over the small to medium-sized aircraft market. Moreover, there has also been a surge in new entrants. Between Chinese manufacturer COMAC, the Russians with Tupolev and Sukhoi, the Brazilians with Embraer and Japan’s Mitsubishi, airlines now have a lot of choice.
Although these planes are mainly for small distance flights, it won’t be much longer until they are refined to fly as far as Boeing and Airbus's models. And, especially with Boeing’s problems, there is strong motive for these companies to do so, seizing the opportunity to gain market share from this established manufacturer.
Thanks to the support of the American government, it is highly likely that Boeing will recover. Nevertheless, with Airbus delivering 350 more planes in comparison last year, they will need to act fast to re-establish themselves in an increasingly competitive market. Further negligence towards aircraft safety compliance could spell disaster for this once market-leading manufacturer.