Ready for Take-Off (Again): Boeing 737 Max cleared to fly by EU Regulators

November 27, 2020

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3 min read

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What's going on here?

The European Union Aviation Safety Agency (EASA) has deemed the Boeing 737 Max safe to fly again following changes to its system.

What does this mean?

The plane, previously Boeing’s bestseller, has been grounded since early 2019 following two fatal crashes in Indonesia and Ethiopia. However, following extensive testing, the EASA has announced that the model has reached the required safety standards and is expected to return to the skies by the end of the year. America’s Federal Aviation Authority, who were criticised for their initial certification of the jet, are also reportedly close to clearing the plane. Generally, other major regulators copy the lead of these two agencies. However, the Civil Aviation Authority of China, the first agency to ground the model and a growing player in the industry, is yet to set a timetable for the 737 Max’s return.

What's the big picture effect?

This news represents both concerns and opportunities for law firms and airlines alike. It is likely that orders of the plane will rise following its recertification. Despite the COVID-19 pandemic, airlines are still contemplating purchasing the model due to its lower operating costs. This returning market represents opportunities in aviation financing and leasing, as well as litigation. Rising tensions between manufacturers and airlines have been bubbling up for years, with Emirates President Sir Tim Clark stating that carriers were ‘fed-up’ with models not meeting contractualspecifications. If the 737 Max once again fails to live up to expectations, it could lead to major disputes arising. These disputes may be exacerbated by the global supply chain issues caused by the pandemic, potentially leading to orders being fulfilled later than scheduled.

The reintroduction of the jet will also be sounding alarm bells in the insurance industry. Due to the plane’s turbulent past, it is likely that premiums will start higher than the average model. This could represent an issue to airlines, as their low levels of cash flow in the current climate may prevent them from being able to take out such premiums upfront.

The recertification of the jet will also provide a boost to the aviation industry. The COVID-19 pandemic has brought the sector to its knees, and the rise in Boeing’s stocks following the news will hopefully be a sign of things to come. Many airlines already possess 737 Max’s, which have been losing them money due to maintenance and storage during their grounding. With their lower operating cost, it is likely they will want them to return to the skies as soon as possible.

Despite the positive news, several questions remain over the reintroduction of the 737 Max. If some aviation regulators do not recertify the plane, it will not be able to fly internationally to those destinations, limiting its utility. It is also yet to be seen if airlines can justify purchasing or financing new jets, with many in jeopardy and some, such as Thai Airways, undergoing debt restructuring to avoid bankruptcy. Perhaps the most important question that is yet to be answered is whether passengers will feel confident to fly on the aircraft. Boeing’s own research showed that as of December 2019, 40% of travellers were not willing to board a 737 Max. Whilst the news that the plane can return to the sky is positive, it is far from a certainty that the jet, much like the aviation industry, will return to full service anytime soon.

Report written by Conor McDermott

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