Boeing has agreed to cover payments for jet engines made for its grounded 737 MAX, easing the burden of the production delay on suppliers General Electric and Safran. The MAX jet is powered by LEAP-1B engines made by CFM, a joint venture of the two companies. Executives at Safran disclosed the Boeing agreement, reached this week, during the company’s earnings call Thursday. “All the engines which are going to be delivered in 2020 will be fully paid, net paid,” said Safran CE Philippe Petitcolin. He also said Boeing will cover payments for engines that were delivered in 2019, many of which have been stuck on MAX aircraft that Boeing assembled but cannot deliver. Normally, CFM gets paid as the engines are produced but doesn’t get its final payment until the plane is delivered to an airline. <br/>
general
CFM International is expecting to produce an average of 10 Leap-1B engines – the powerplant for the Boeing 737 Max – per week over the course of 2020, out of a total annual Leap production of 1,400. The forecast has been disclosed by CFM partner Safran in its full-year financial figures, which assumes that 737 Max deliveries will restart in mid-2020 following the production halt in January. Safran says it has implemented a hiring freeze, cost-saving efforts, and a reduction capital expenditure to help offset the impact of the Max situation. The Max crisis was reflected in powerplant order activity, with Leap orders and commitments reaching 1,968 last year compared with 3,211 for 2018. Safran says production levels over 2019 were nevertheless “stable”. <br/>
Boeing this week named a full-time replacement for former chief information officer Ted Colbert, who was promoted to lead the company’s parts and services business. Susan Doniz, currently CIO at Qantas Group, joins Boeing as CIO in May, reporting to CE David Calhoun. She succeeds interim CIO Vishwa Uddanwadiker, who took the role after Colbert was named CE of Boeing Global Services in October. Doniz will manage IT staff across 50 countries and lead digital initiatives such as Digital Enterprise, a companywide project to improve IT systems and processes, including those around enterprise resource planning. Doniz’s team also will be integral to a unit called Boeing AnalytX, which pulls together analytics and other capabilities across the company to provide insights internally and to its customers. <br/>
US airline shares are on pace for the biggest 5-day rout since March 2009, and 2 Wall Street analysts warned that the drubbing is poised to get worse as the new coronavirus crimps travel demand. Deutsche Bank’s Michael Linenberg cut his recommendation to hold from buy on 6 carriers, citing the rising risk that the outbreak “will disrupt travel patterns beyond China.” Daniel McKenzie of Buckingham Research said industry stocks could drop another 15% to 20% and “potentially more, depending on the severity of the economic fallout” from the virus. “If the collapse in demand to Asia is a sign of things to come in other geographic entities, the stocks are not even close to discounting the potential demand fallout from a broader spread,” McKenzie said in a Thursday report. <br/>
US senators have introduced a bill to Congress intended to reinforce safety and oversight, particularly with regards to certification, in the aftermath of the Boeing 737 Max grounding crisis. The proposed legislation, titled the Restoring Aviation Accountability act, has been submitted by Democratic senators Richard Blumenthal, Tom Udall and Edward Markey – all members of a Senate transportation committee. Udall says the measure will reverse provisions which have allowed “self-certification” in the aviation industry, addressing a “substantial weakness” in the US FAA certification process. He says the bill has support from the US Air Line Pilots Association, the Association of Flight Attendants, and other industry groups. <br/>
Consumer advocates are complaining that a regulation proposed by the US DoT — at the airline industry’s urging — would make it harder to penalise airlines for bad behavior and to adopt new rules that protect travellers. The rule would require the DoT to apply a new standard when considering civil penalties or new regulations on air carriers: whether the actions in question meet a specific definition of “unfair and deceptive practices.” The new policy would also allow airlines to request hearings before new regulations are imposed. In documents describing the proposed rule, the DoT acknowledged that it “could translate into the department performing fewer enforcement and rule-making actions” against airlines and could “lengthen the time needed to complete the actions.” <br/>
The UK appeal court’s ruling that plans for a third runway at London Heathrow are unlawful on climate grounds is in line with intensifying pressure on a commercial aviation industry that had been enjoying years on largely unconstrained growth. Crucially, this case hints at a future where the sector might face more legal challenges to its expansion plans. Those instigating the challenges would cite the need for governments to uphold commitments made under initiatives such as the Paris Agreement, which create legal obligations to meet certain emissions targets. For an industry that lacks any straightforward answers to how it can grow and concurrently reduce its environmental impact in real terms, being challenged on such an issue in the courts would be a significant development. <br/>
For China’s airlines, all bets are off. With a future that previously seemed blindingly bright, the last decade was typified by rapid growth, huge fleet additions, a massive international route map and expansion of service to domestic locations that didn’t even have a runway 20 years ago. On the surface, at least at the top 25 airports, airlines were filling over 80% of seats offered. As of the end of 2019, China’s airlines operated over 3,700 passenger airliners, and they were projected to represent one third of global airliner demand in the next 10 years. Chinese carriers have orders for over 900 new airliners from Boeing and Airbus. But now, the entire foundation of the China air transportation system has been shattered. When the dust clears from the coronavirus epidemic, it will bear little resemblance to what it was in 2019. <br/>