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Boeing's 737 MAX to Fly Again: What Awaits U.S. Airlines?

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After remaining grounded since Mar 2019, things are finally looking up for the seemingly ill-fated Boeing's 737 MAX aircraft. Following its twin crashes in different parts of the world that killed a total of 346 people on board at an interval of barely a few months, the Federal Aviation Administration (FAA) gave the green signal to the aircraft for take to the skies. Notably, the beleaguered aircraft was under scrutiny and underwent several software and other changes ever since the ban on flying was imposed 20 months ago. 

Can Boeing 737 MAX Planes Fly Immediately?

Even though cleared by the U.S. air safety agency, it does not mean that the aircraft will resume operations immediately. The FAA asked Boeing (BA - Free Report) , the manufacturer, and the airlines that fly the model to make specific software-related alterations to its flight control system, which is blamed for the deadly mishaps. Moreover, the MAX operators have to provide more stringent pilot training per a BNN Bloomberg report.

Moreover, the U.S. safety agency’s decision is reportedly applicable to the United States. Air safety agencies in certain other parts of the world are conducting their own reviews pertaining to the struggling aircraft. Therefore, the Boeing 737 Max model will remain grounded in some places unless those review processes are completed.

What the Decision Means for U.S. Airlines

Even before the coronavirus pandemic struck in the first quarter of this year, airline stocks in the United States with Boeing’s737 MAX aircraft in their fleet, suffered huge revenue losses due to the grounding order. Notably, Southwest Airlines (LUV - Free Report) , American Airlines (AAL - Free Report) and United Airlines (UAL - Free Report) have Boeing's 737 MAX planes in their fleet. However, Delta Air Lines (DAL - Free Report) is the only major U.S. airline not to fly the 737 MAX planes. Prior to the grounding, Southwest Airlines, American Airlines and United Airlines had 34, 24 and 14 such jets in their fleet, respectively.

Following FAA’s decision, American Airlines will be the first U.S. carrier to restart its commercial flight services using Boeing's 737 MAX jets. This Fort Worth, TX-based carrier, currently carrying a Zacks Rank #4 (Sell), will start operating the jets from Dec 29, 2020 on the Miami -New York route. Maintaining its pro-customer stance, management affirmed that passengers won’t be compelled to fly on the aircraft grappling with issues.  In a letter to American Airlines’ team members, COO David Seymour and the operations leadership team stated that “If a customer prefers to not fly on this aircraft, we’ll provide flexibility to ensure they can be easily re-accommodated.”

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Southwest Airlines’ Chairman and CEO Gary Kelly was quoted saying, "There is much work to be done before our Max aircraft will resume service, which we estimate will likely take place no sooner than the second quarter of 2021”. United Airlines does not expect to fly passengers on the Boeing 737 MAX aircraft before the first quarter of 2021. This Chicago-based carrier believes that nearly 1,000 hours of work must be done on each such jet before it is pressed into service.

Meanwhile, Alaska Air Group (ALK - Free Report) expects to take delivery of its  jet in the first month of 2021. Moreover, pilots of this Seattle-based company will have to undergo eight hours of simulator training while the company will fly the jet for 19,000 miles and 50 hours before it officially comes online in March 2021.

Wrapping Up

Even though the FAA cleared the Boeing 737 MAX aircraft, we do not expect a significant uptick in its traffic for the concerned U.S. carriers, at least immediately on returning the planes to commercial services. Passengers are likely to be initially skeptical about the safety of flying on the jets. Although only time will tell us about the exact impact of the resumption of these jets on the respective carriers’ results, we advise investors to watch the space for further updates on this relevant issue.

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