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American Airlines Extends 737 MAX Grounding Tenure As Well

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The fact that Boeing 737 MAX jets were involved in two fatal air crashes in different parts of the globe in a span of five months has invited criticism from all corners. While the first accident was in Indonesia during October 2018, the second one was the Ethiopian Airlines’ crash on Mar 10. Naturally, safety-related questions about the model are flying around.

Responding to the sentiments, the Federal Aviation Administration (FAA) issued a directive on March 13 to ground all U.S.-registered Boeing 737 MAX jets. Consequently, carriers with Boeing 737 Max aircraft in its fleet experienced wide-spread cancelation of flights.

Confronted with such criticism, The Boeing Company (BA - Free Report) has decided to trim its monthly production of the disputed jets by 20% from mid-April to 42. Moreover, Boeing is working hard to resolve the defects in this model under scrutiny. In this scenario, U.S.-based airlines, having Boeing 737 Max jets in the fleet, are adopting a cautious stance on this issue. On Mar 30, Southwest Airlines (LUV - Free Report) and the union representing its pilots — Southwest Airlines Pilots' Association (SWAPA) — notified that Boeing 737 MAX jets will not operate at Southwest Airlines until the end of May 2019. Southwest Airlines has 34 such jets in its fleet.

Now, American Airlines (AAL - Free Report) has joined Southwest in extending the period of the grounding of the disputed jets. This Fort Worth, TX-based carrier, which currently has 24 such jets in its fleet, announced that 737 MAX operations will remain suspended at American Airlines through Jun 5. While cancelling 90 flights per day the carrier had previously stated that 737 MAX jets would remain grounded until Apr 24.

American Airlines is awaiting further notifications on the issue from U.S. regulators. The company is aware that its latest decision to prevent the Boeing-made Max jets from flying for more than a month compared with the earlier projected date will increase its passengers’ harassment. To mitigate the harassments caused by the prolonged cancellations, the carrier stated that it will reach out to the affected customers with available re-bookings.

 

With two airline heavyweights extending their respective grounding periods for 737 MAX jets, we expect other airlines with these planes in their fleet to follow suit. Therefore, investors are anticipated to eagerly await updates on this burning issue going forward.

Zacks Rank & A Key Pick

American Airlines carries a Zacks Rank #3 (Hold). A better-ranked airline stock is SkyWest (SKYW - Free Report) with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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