Boeing 737 MAX Resuscitation Dawn Global Aviation Recovery Is Still Difficult

The Federal Aviation Administration (FAA) said last week that it had completed the 737 MAX certification flight test. This is a rare piece of good news for Boeing, which has suffered much since the 737 MAX crash last March. It seems to be the dawn of the dark end.

In twenty-first Century, the economic news reporter sent an email to Boeing to inquire about the progress of the 737 MAX flight. As of press release, Boeing has not yet replied.

The industry believes that the 737 MAX is still a long way from flying, and it is still uncertain that its stock price in June will not last for the best month since 1982.

In fact, in addition to the Boeing crisis, the global aviation industry is already suffering from the new crown attack. Boeing, Airbus and Air France have announced layoffs in succession. With the re opening of the economy and the unlocking of the border, the aviation industry is showing signs of recovery.

It is still uncertain whether we can fly again.

The US Federal Aviation Administration (FAA) said in July 1st that it had completed the 737 MAX certification flight test with Boeing. This is a rare good news for Boeing, which has been suffering for more than a year since the 737 MAX crash in March last year, which means that the milestone of the model's return is more like the dawn of the dark end.

According to Adam Levine-Weinberg, a senior expert in the field of industrial and consumer goods, a three day 737 MAX flight test is the key to testing whether the latest design changes can ensure the safe flight of the aircraft. In the next few weeks, FAA officials will analyze data collected in a series of test flights. This will help them verify the validity of Boeing design changes. In addition, other steps in the re certification process include the analysis of the proposed pilot training procedures and the documentation provided by Boeing. After the public review period, FAA may eventually take long-awaited measures to re certify 737 MAX and outline the procedures that airlines must resume following the resumption of the 737 MAX cluster.

According to the current timetable, FAA is likely to re certify 737 MAX in mid September, which will enable us to return to the US market by the end of the year.

However, Levine-Weinberg pointed out that re certification does not mean the end of the 737 MAX grounded. International regulators, especially European regulators, are prepared to demand further improvements to the 737 MAX security system by the end of next year. These changes (and the refurbishment of aircraft that have been produced) will increase the cost of Boeing and reduce future profits. Pilots also need additional simulator training to continue driving 737 MAX, which may cause Boeing to pay related expenses to airline customers. Therefore, for the 737 MAX, the outlook is still highly uncertain.

FAA stressed: "the agency is following a carefully considered procedure and will take the time to thoroughly examine Boeing's work. We will cancel the no fly order only after FAA security experts believe that the aircraft meets the certification standards. "

The Boeing prospect is still in doubt.

Thanks to the good news that the recovery seems promising, Boeing's share price rose 26% in June, the best month since 1982. Analyst Lou Whitman believes that this is mainly because investors are beginning to believe that Boeing's worst period is over and full of confidence in the 737 MAX recovery.

Whitman analysis shows that 737 MAX can help increase free cash flow if it can be returned, but Boeing's business will be under pressure in the coming years. Whitman stressed that even if Boeing is conducting a 737 MAX test flight, it is unlikely that the aircraft will be able to resume service until September. Even with the re flight agreement, Boeing also has about 400 manufactured 737 MAX stocks, which need to be cleared within a few months after the flight.

Therefore, even in the most optimistic case, the Boeing 737 MAX production plan in the next few years will also be moderate. "The company still has a long and difficult road to go." He stressed.

In terms of stocks, Ari Wald, head of Oppenheimer technology analysis, said, "Boeing is one of the stocks that have been revived after the collapse of the stock market in the first quarter of the year. Now, we think that it is being built, and the next month should still be a trend of turbulence. There is still a lot of work to be done to build up the bottom.

Quint Tatro, President of Joule Financial, warned that the company's share price may still be under pressure. "The stock seems to be experiencing a short-term rebound. From a fundamental point of view, I think (buying at this time) is totally risky. For a long time, it will be a news oriented company.

He added that Boeing's internal problems, coupled with the economic downturn triggered by the new crown virus, could make the company at a disadvantage. "We must really begin to see the recovery of aviation industry, so that Boeing can really begin to make progress in finance."

The airline industry is full of grief.

Boeing has been hit hard by the double impact of the 737 MAX grounded and the new crown pandemic. In order to save themselves, Boeing has cut production and layoffs. According to Boeing's statement, the output of its 787 Dreamliner has dropped from 14 in a month to 7.

Boeing said in a statement on April that because the new crown virus epidemic had a serious impact on the aviation industry, the company will implement the previously announced plan to reduce the total number of employees by about 10%. In addition, due to the most affected commercial aircraft sector, Washington state will be hit harder, Boeing will lay off more than 15% in the state.

Although he has tried his best to save himself, Boeing's financial pressure is still small. Boeing CEO Dave Calhoun said Boeing still needs a lot of money and does not rule out the possibility of financing the open market.

Coincidentally, Airbus also announced layoffs in June 30th. Airbus announced that it will cut 15 thousand jobs worldwide by the summer of 2021, the largest layoffs for Airbus since its establishment. Airbus has about 135 thousand employees, so the layoffs account for about 11% of the total workforce.

According to the layoffs announced by Airbus, Germany will cut 5100 people, France will cut 5000 people, the United Kingdom will cut 1700 people, Spain will cut 900 people, and the rest of the world and other regions have reduced 1300 people. However, the Airbus round of layoffs still needs to be communicated with trade unions and partners. The consultation process has been launched, and plans to reach an agreement in 2020 and complete the reorganization before next summer.

Ben Baldanza, the former chief executive of Sprit airlines, believes that in addition to layoffs and self-help, the top priority of the two companies is to discuss with each airline in the world their orders, recovery plans and demands for aircraft. Baldanza added, "this is not an easy period for airlines, aircraft leasing companies or commercial aircraft manufacturers. Airlines are doing their best. With the slow recovery of demand, they are accumulating cash and increasing their capacity, and at the same time carry out necessary reforms to restore consumer confidence. Boeing and Airbus need to consider their customers, including airlines and leasing companies, and how they can not only reconfirm orders that once looked solid, but also ensure that after the new crown disappears, there will be enough airlines and leasing companies to buy their aircraft.

Apart from aircraft manufacturers, airlines are having a bad time. In July 3rd, Air France Group issued a statement on the restructuring plan, confirming that it will cut 7580 people by the end of 2022, of which Air France will cut 6560 people, and Hope airlines, the regional airline under the group, will reduce 1020 people.

Air France Group also said that the epidemic caused great losses to the company, and the activities and turnover from March to June plummeted 95%. When the crisis was the most serious, the group lost 15 million euros a day. According to the forecast of Air France, due to the uncertainty of the future epidemic situation, the lifting of travel restrictions and the demand for commercial flights, if the most optimistic estimates are made, the group business activities will not be restored until 2019 until 2024.

Analysts believe that the decline in demand is forcing the aviation giant to lay off the "last straw". The International Air Transport Association (IATA) predicts that global passenger traffic will decline by 54.7% in 2020 and 40.4% in capacity. According to IATA data, global air passenger demand fell 91.3% in May, but slightly better than the 94% decline in April.

IATA director and chief executive officer Alexandre de Juniac said, "the air passenger market in May was not as shocking as it was in April. The first improvement in May was the domestic market, while international passenger traffic was almost completely shut down. The long and hard recovery has just begun. The impact of the new epidemic in key markets is still uncertain.

Government assistance is crucial.

Brian Pearce, chief economist at IATA, said: "we believe that airlines may lose an unprecedented $84 billion in 2020. If the emerging market countries and the United States continue to impose border restrictions, the 36% reduction in air passenger traffic this year is expected to further rise to 53%.

However, Pearce said that with the relaxation of the multinational border, he expects a recovery in the second half of 2020. "We see that negotiations on bilateral opening borders have only just begun."

Recently, the EU relaxed the ban on unnecessary travel for 15 countries outside the European Union (including Australia, Canada and Japan), while maintaining the ban on American visitors. In addition, China and South Korea, Singapore and Germany have opened "fast track". This series of policies means that there are signs of recovery in intercontinental travel.

Pearce said, "this is enough to restart the aviation industry in some countries. For many airlines, they really rely on international air travel. "

Apart from border control, the profitability of commercial travel is also deteriorating. Analysts pointed out that before the new crown virus pandemic, companies that had relied on air travel to do business had found a way to adapt video conferencing, which would greatly reduce the demand for commercial travel. Keith Mason, director of Cranfield University air traffic management center, said, "there is reason to think that business travel may be reduced by 1/5."

Calhoun also said that the demand for air travel would take two to three years to recover to the level before the epidemic.

Despite the fact that air travel is slowly recovering, airlines are still not at the moment. Therefore, government assistance is very important to them. At present, governments, including the United States, are increasingly providing financial assistance to airlines in order to maintain the operation of ailing airlines.

According to reports, the US Treasury has signed a letter of intent with the American Airlines, Hawaiian Airlines, Sky West Airlines, Spirit Airlines and private holding Frontier Airlines on the terms of the loan. The five airlines will receive part of the $25 billion federal loan to protect against the impact of the epidemic on their business.

The US Treasury did not disclose the amount and terms of the loan. Airlines were required to provide equity, warrants or priority debt to compensate taxpayers.

IATA predicts that the International Air Transport Association predicts that a total of $200 billion will be needed for global government support.

Mason said that government assistance is crucial to ensuring the continued operation of airlines. "We will see the integration of the market, and those airlines without government assistance will be hard to survive, and some will not be able to escape."

However, Mark Weiss, a former pilot of American Airlines, told the twenty-first Century economic report that there was no need to worry too much about airlines. "Airlines are financial institutions. They will shift costs to passengers, such as limiting luggage, reducing the distance between seats, and doing everything possible to expand their profits."