Spotlight Boeing: Global Consent Difficult, China Retaliation, Compensation Woes

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Global consent on the 737 Max was difficult in the first place. Trump's belligerent trade policies make matters worse.

Global Consensus Will Be Difficult

The New York Times reports To Get Boeing 737 Max Flying, Global Consensus Will Be Hard

Aviation regulators from around the world, who met in Fort Worth on Thursday, are continuing to press the F.A.A. for details on the fix to the anti-stall system blamed for two deadly crashes involving the Max, as well as the process for assessing the software, according to an F.A.A. official. One big sticking point: whether to require that pilots undergo additional training on a flight simulator.

If some regulators did require training, the condition would mean that the plane could be out of service in certain countries for months longer than expected. Boeing had recently outlined a target of late June to airlines. But the F.A.A. has been more circumspect.

“We can’t be driven by some arbitrary timeline,” Daniel Elwell, the acting F.A.A. administrator, said on Thursday. “I don’t have September as a target, I don’t have June as a target.”

The F.A.A. suggested last month that it would not require pilots in the United States to spend more time on a simulator. But that matter is not yet settled.

If Wishes Were Fishes

Even if the FAA agrees no simulation training is requires, don't expect foreign governments to be so kind.

The Chinese aviation authorities and regulators from other emerging markets could be holdouts. They appear more likely to insist that their pilots — many of whom have less experience than their American, European and Canadian counterparts — train on simulators, according to a person briefed on the discussions.

Boeing has told its airline customers that the Chinese regulator is the biggest wild card. China was the first nation to ground the Max after the Ethiopian Airlines crash in March, citing concerns over whether pilots could manually control the plane if it ran into problems.

Delaying its approval for the Max could also provide China leverage in the trade war with the United States. Boeing aircraft are one of the largest American exports to China by dollar value, and an obvious target for officials in Beijing if they want to further retaliate.

China and the EU

China and the EU are unlikely to cooperate with the FAA even if the FAA rules in favor of Boeing.

  • China won't cooperate thanks to Trump's trade negotiation tactics.
  • The EU has a chance to promote Airbus as well as strike back against Trump's proposed auto tariffs.

Compensation Claims Mount

As Boeing awaits the FAA's decision, Compensation Claims Against Boeing Beginning to Ramp Up.

Airlines are increasingly going public with desires to be compensated by Boeing for the grounding of the 737 MAX.

Norwegian Air Shuttle and Spice Jet said shortly after the MAX grounding March 13 they were going to seek compensation from Boeing.

Air China has asked for compensation, reports Reuters. Other airlines with grounded MAXes are also beginning to notify Boeing about compensation claims.

Compensation for delivery delays is also a risk to Boeing. This already has reached $1bn, one aviation lawyer estimates, and stands to climb by billions more, depending on how long new deliveries are delayed.

Excusable Delays?

Boeing’s legal department is already notifying some customers that the grounding falls within the “excusable delay” clause of sales contracts.

737 Max Orders and Grounded Planes

Boeing is a very big deal.

To say that Trump isn't helping matters is more than a bit of an understatement.

Three Discussion Ideas

  1. Unwinnable Trade War: Who Will Win the Trade War? Some Say China, Others Say Trump
  2. Rare Earth Hardball: Last week I noted China Threatens to Cut Off US Supply of Rare Earth Elements. Today the Financial Times commented similarly: China's state planner suggests using rare earths in US trade war
  3. Trade War Over Soon? Trump Says "Trade War Could be Over Quickly" Why Should Anyone Believe Him?

Election Impact

China striking back at the US would hurt China as well, but it is prepared to do so.

Trump faces an election, Xi Jinping, China's leader, doesn't.

Claims that the US have already won the trade war are preposterous.

Mike "Mish" Shedlock

Comments (16)
No. 1-12
Mike Deadmonton
Mike Deadmonton

Trade war is over and the US won! Just like the win of Operation Enduring Freedom. That win didn't feel like much of a win and I doubt the trade war win will either.

Augustthegreat
Augustthegreat

“Trade war could be over quickly”, if all other countries submit themselves to Trump!

mudpuppet
mudpuppet

Sure Boeing's problems are amplified by a trade war, but just imagine if Boeing built first rate aircraft that didn't fall out of the sky........sorry I'm off topic.......it's Trump's fault right Mish?

Casual_Observer
Casual_Observer

The truth is we win because of our values. China has a terrible human rights record and there is no freedom or liberty there.

thimk
thimk

I thought Trump suggested the airplane be rebranded ? Anyways maybe Potus should fly in one to show that it is safe . /s In any event these birds need to get airborne or all is lost .

BornInZion
BornInZion

The airline industry has earned a reputation of ruthlessly and exhaustively pursuing the highest air safety standards. Boeing, and FAA's cozy relationship them, has damaged that achievement. The 737 Max is an engineering failure. Pressing it into production without redundant angle of attack sensors ought to result in epic harm to Boeing's viability as an ongoing concern! In any event, Boeing has demonstrated a shockingly cavalier attitude towards safety that has done catastrophic harm to the public's worldwide trust in the airline industry as a whole. How they respond to the 737 Max crisis could start to repair that wound. Lawyering up and passing the financial risk off onto customers through clauses buried in the sales contract is wrong headed and self-defeating. It is a long and difficult road to recover the loss of a once great reputation.

2banana
2banana

One more discussion idea.

  1. China is a massive food importer as the country doesn't produce near enough food to feed its own citizens. Swine flu is wiping out Chinese pork. Chinese tariffs are making American agriculture goods much more expensive. American farmers are planting much less crops this year so there will be much less on the world market in 2019

Significant food inflation is already showing up in China. At what point do riots start? At what point do hungry Chinese stop behaving?

There is a reason why China eliminates ALL references and sources to Tienanmen Square on its Google built internet. There is a reason why any Chinese citizen will be arrested and jailed for a long time if they dare do anything for the 30th anniversary of TS.

Dsgn
Dsgn

Interesting. Not a peep about fixing that thing???

Bob Braan
Bob Braan

The safest thing is to just avoid the 737 Max. We are on our own for safety now.

I usually fly Delta. They don't have any 737 Max aircraft. Google "Southwest Airlines is going to allow people who don't want to fly on the Boeing 737 Max to switch planes for free". United as well so far. Hopefully all other airlines allow passengers to avoid the 737 Max for free as well.

If passengers refuse to board the 737 Max it will go away. Chopped up for scrap. Unable to kill any more customers.

Both Boeing and the FAA said the plane was safe originally and also safe after almost every other country had grounded it after two crashes. Why would anyone believe anything they have to say about safety now?

They used to be the safest in the world. Now it's all about profits so we are on our own for safety.

The original plan at Boeing was to create a proper, clean sheet new design to replace the 737. It's not designed for modern engines at all which is where the problem started. Boeing planned to finally kill this dinosaur from the 60s. Instead upper management and sales killed this idea as well as 346 passengers.

Advancingtime
Advancingtime

Again I wish to point out that China is not sitting on its hands but has a full fledged agenda. The C919, being built by Chinese state-owned aviation manufacturer Commercial Aircraft Corp of China (COMAC), is a perfect example of Chinese intentions and is a kick in the teeth of those endorsing free trade. COMAC has spent 11 years and $6.5 billion developing the C919, which is seen as China's answer to the Boeing 737 and Airbus 320.

The C-919 has a flight range of up to 3,451 miles (5,555 kilometers), which means it can fly non-stop from Shanghai to Jakarta or from Paris to Montreal and it can fit 158 to 168 seats. This hits right at the core market of its competitors. It does not take a rocket scientist to calculate how rapidly China can ramp up production. The article below gives the details behind this threat to Boeing's dominance.

HossCatDaddy
HossCatDaddy

Mish the never trumper let's blame Trump for everything

regular-taxpayer
regular-taxpayer

Maybe not on topic but Mish you can add this to the list of Trump's trade successes:

Chipmaker Qualcomm Inc agreed to buy NXP in 2016 but walked away from the $44 billion deal last year after failing to secure Chinese regulatory approval amid a bitter Sino-U.S. trade spat.