The US Federal Aviation Administration (FAA) has cleared the Boeing 737 MAX for return to service following the completion of a number of return-to-service maintenance tasks for operators identified by the FAA (set out here). Operators will need to use the pre-Operational Readiness Flight (ORF) audit to perform essential tasks for returning aircraft to service, namely de-preservations and other maintenance tasks from the Aircraft Maintenance Manuals as well as installing new software, completing wire separation modifications, testing the new Angle of Attack (AoA) system, as well as conducting pilot training.
Boeing has delivered 387 MAX aircraft to date, and has almost the same again waiting to be delivered. The logistics of returning this amount of aircraft to the air is a challenge but Boeing will be keen to ramp up deliveries as soon as it is able. In a statement today, Boeing states that it has spent the last 20 months working with airlines, providing them with detailed recommendations regarding long-term storage and ensuring their input was part of the effort to safely return the airplanes to service.
"We will never forget the lives lost in the two tragic accidents that led to the decision to suspend operations," said David Calhoun, chief executive officer of Boeing. "These events and the lessons we have learned as a result have reshaped our company and further focused our attention on our core values of safety, quality and integrity."
"The FAA's directive is an important milestone," said Stan Deal, president and chief executive officer of Boeing Commercial Airplanes. "We will continue to work with regulators around the world and our customers to return the airplane back into service worldwide."
In addition to changes made to the airplane and pilot training, Boeing states that it has taken three important steps to strengthen its focus on safety and quality. These include bringing together more than 50,000 engineers in a new Product & Services Safety unit, and empowering those engineers to safety and quality. Boeing also stresses that the company is “identifying, diagnosing and resolving issues with a higher level of transparency and immediacy”.
The real test will be when passengers begin to book flights again and if they actively avoid the aircraft type for the short-term.
Meanwhile, the final quarter of the year has seen the large leasing companies tap once more into the capital markets to shore up their liquidity coffers ahead of the COVID-19 winter that is sure to hammer airline clients further.
Avolon entered the market this week with a $1bn senior issuance, followed today by Air Lease Corporation (ALC) with a $1.5bn unsecured bond deal offered in two tranches under its MTN programme. And the news is out today that DAE is lining up banks to prep a sukuk issuance by the end of the year. Industry sources suggest that the launch of further bond deals are imminent.
This is a good time to tap the market. With the positive news from two pharmaceutical companies – Pfizer and Moderna – on the efficacy of COVID-19 vaccine trials, investors are turning more positive on the future for the aviation sector and indeed for lessors. This crisis – so far at least – has laid out in plain sight for investors of the divide between leasing companies and their airline client companies. Well capitalised and fiscally responsible lessors have demonstrated that they can not only maintain cashflow during a crisis but they can assist their clients in managing through the worst crisis the industry has ever experienced. It’s early days still – vaccinations programmes are unlikely to be rolled out and in place for another six months to a year but the key factor is that the confidence that this is coming and a return to a semblance of normality will get travellers booking flights and holidays for 2022 for sure, if not later in 2021. The main challenge now for airlines is surviving the winter.
Many airlines have done a good job at cutting capacity, reducing cash burn and raising additional funds – but airlines are costly to run and bloated organisations that haven’t cut far enough, quickly enough, will struggle without further government aid, which may or may not be forthcoming. An journalist in a UK newspaper column today referred to airlines as “bailout funds with wings” and derided further government aid to support an uncompetitive market in Europe.
With the focus on green policies around the world, firms that are pushing that environmental message seem to be benefitting more from government support right now. Airlines are pushing their green credentials in presentations at investor conferences and many are working hard in this regard, but until the manufacturers take another leap forward in green technology, as a carbon emitter, the industry will continue to have a green image problem. Regardless of the comments from high profile CEOs and aviation industry groups, the contribution the industry makes to world GDP and globalisation is not sticking. The industry needs to collectively keep getting that message out.