Boeing loses big order for 737 Max aircraft

https://www.bbc.co.uk/news/business-48899588

by jfk13 • 7 years ago

152 103 7 years ago

bbc.co.uk

dmix• 7 years ago

Last month IAG said it intended to buy 200 Boeing 737 Max aircraft.

So they lost an order of 20 planes but recently signed an order for 200?

Not all bad news.

Regardless it’s good to see real economic consequences being suffered by a company typically anointed for success by the US gov.

steve19• 7 years ago

I wonder if IAG was given a huge discount to entice them to make the MAX look like its still in demand and give other customers confidence.

raverbashing• 7 years ago

I think it's not an order per se, but a letter of intent.

I'm sure it contains some pretty good discounts and opt-outs in case Boeing cannot fulfill their Max obligations.

gsnedders• 7 years ago

And note IAG currently has a lot of A320s and no 737s: getting the IAG order would be a big deal, but it could equally just be IAG trying to get into a stronger negotiating position with Airbus.

rootusrootus2• 7 years ago

Probably politics more than anything to do with the crashes.

chki2• 7 years ago

What do you mean by "politics"?

rootusrootus2• 7 years ago

The airline in question is controlled by the government of Saudi Arabia.

spectramax2• 7 years ago

All airlines should cancel MAX orders. After watching the CEO defend their position in the Q2 shareholder’s meeting, he killed the reputation of Boeing from investors, people and customers. Boeing deserves nothing but financial punishment and consequences of the people that died in the two crashes.

Edit: Link to the meeting https://youtube.com/watch?v=xOQmQpKHVWA

rapsey2• 7 years ago

This completely unrealistic. CEOs will always defend the company. That is their job.

king_phil• 7 years ago

It was not written that he was defending the company, but depending their position. Not the same.

spectramax2• 7 years ago

Definitely. However, managing public relations and the image of the company, maintaining customer relationships is also CEO’s job.

justicezyx• 7 years ago

Defend in what sense?

In defending what made the company great, or just the share price?

sametmax3• 7 years ago

And he failed at it, since he lost the confidence of the room after he spoke.

There are many strategies you can choose from to defend your company. Not just "we're cool guys".

alkonaut2• 7 years ago

A Japanese CEO crying and bowing in silence is defending the company and the brand.

This is defending the short term stock value and nothing else.

hyperbovine• 7 years ago

Their job is to maximize shareholder value. Which could certainly be accomplished in some cases by forthrightly admitting to wrongdoing. The problem is that almost invariably this action immediately precedes said CEO deciding to spend more time with his/her family.

golergka• 7 years ago

CEOs job is to protect reputation of the company. There are times when honestly owning your mistakes is better for reputation than pathetic attempts to save face.

_ph_6• 7 years ago

And what should they buy instead? See my longer comment about that.

seanmcdirmid2• 7 years ago

C919s? Here is china’s big chance I guess.

seanhunter• 7 years ago

Probably the surprising thing is how _few_ orders they have lost. My understanding is that this is because it is very very difficult for an airline to change from Boeing/Airbus to Airbus/Boeing. They need to retool their whole supply chain and retrain all their ground staff and pilots.

...but several airlines are talking about it. Notably American https://airlinerwatch.com/american-airlines-eyes-airbus-a321... and United in the US https://airlinerwatch.com/united-airlines-considers-airbus-a... are both considering replacing old Boeing planes with Airbus.

tyingq6• 7 years ago

If you look at the orders by customer[1], you will see quite a few that exclusively or mostly fly 737's.

It would be costly for an airline to have to retrain almost all their pilots, mechanics, etc on a new aircraft...and to purchase all the associated supporting equipment.

And, the Max has significantly better fuel efficiency, seating capacity, etc than other 737 models. Falling back to an earlier model isn't easy either.

They are banking on the general public forgetting about it over time. Which has happened in the past.

[1] https://en.wikipedia.org/wiki/List_of_Boeing_737_MAX_orders_...

sametmax3• 7 years ago

They are banking on the general public forgetting about it over time. Which has happened in the past.

Which almost always happen. Good strategy. Works for politicians, abusive spouses, big companies. What incentive would they have to do otherwise since society most often offers short outburst of rage, then focuses on something else ?

et2o• 7 years ago

I'd guess 99% of people don't even notice what plane are flying on.

JKCalhoun• 7 years ago

They are banking on the general public forgetting about it over time. Which has happened in the past.

And banking of course on no more crashes. They're on a tightrope for sure.

klingonopera• 7 years ago

As I have understood, there are waiting lists at both manufacturers, and they're not short, so short-term changes are probably bad for all parties in that business.

A Saudi company changing could be more notable, because if anyone has enough money to buy themselves a better spot in those lists, I don't doubt it wouldn't be them...

I have absolutely zero affiliation with the airplane industry, so everything I said might only be coincidentally true.

secfirstmd• 7 years ago

Yes I think this would be a major point. Airlines are worried about what happened straight after 9/11 were many cut orders, then places like Ryanair option loads of aircraft at discount prices, then airlines struggled to get back into the booking list. There is a waiting list of many years at the moment. They would be a bit crazy to ditch their spots right now.

_ph_6• 7 years ago

Of course this will shift some orders towards Airbus. But besides that Airbus won't be able to deliver additional orders on short notice, the airlines certainly don't want to give Airbus too much power by dropping Boeing completely.

assblaster• 7 years ago

The whole design behind the max was to minimize pilot training and retraining. The airlines have as much to gain from retooling an existing design as Boeing has.

ethbro3• 7 years ago

The irony is that, as near as I can retrace the public timeline, American was actually the carrier that bludgeoned Boeing into producing an up-engined 737 in the first place.

http://news.aa.com/news/news-details/2011/AMR-Corporation-An...

In retrospect, a lesson in not letting your biggest customers drive your development pipeline.

WalterBright10• 7 years ago

In retrospect, a lesson in not letting your biggest customers drive your development pipeline.

A new airplane program is not, and pretty much cannot be, started without having major commitments from airline customers. They are developed very much based on conversations with airlines and what they need and will pay for.

Cyph0n• 7 years ago

This is hugely industry dependent. In the service provider routing industry, for example, many new features are developed after customers request them for their networks.

the_duke• 7 years ago

American already operates about ~400 Airbus 320s vs ~350 B737. [1] United also has ~200 A320s vs ~340 B737 [2].

They both have mixed fleets. Of course the story for carriers with a homogeneous fleet is very different.

Part of it is surely PR posturing though. Both to look good with customers and to improve the negotiating position with Boeing.

[1] https://en.wikipedia.org/wiki/American_Airlines_fleet [2] https://en.wikipedia.org/wiki/United_Airlines_fleet

tgsovlerkhgsel2• 7 years ago

https://news.ycombinator.com/item?id=20376062 explains why: Airbus is "sold out", can't deliver more planes in the timeframes that are required. The airlines don't have much of a choice.

fred_is_fred• 7 years ago

Unsure about American, but I am sure that United flies A320/321 and 737s both, so I don't see how switching would be that hard for them. Maybe just due to pilots?

burtonator• 7 years ago

Good. They deserve to lose it... Let the market correct.

open-source-ux• 7 years ago

VOX has a good explainer video on what caused the 737 Max to crash twice for anyone who doesn't know the details. Essentially, Boeing installed sensors and software to automatically push the plane nose down if the plane angle was too steep as it ascended. This software/sensor combination is implicated as the cause of the recent crashes in Indonesia and Ethiopia.

The real reason Boeing's new plane crashed twice:

https://www.youtube.com/watch?v=H2tuKiiznsY

ethbro3• 7 years ago

At this point, I think everyone on HN who doesn't specifically block Boeing articles is aware of the reason.

_trampeltier• 7 years ago

Last week Boeing announced that it would give $100m to help families affected by the two crashes.

Thats not even 300k per died person. And if you search for the price for an 737Max, you guess what it's about 100m per plane ..

FabHK• 7 years ago

In Indonesia, minimum wage is around USD 1500 annually, and not everyone gets that. Fresh grads in white-collar jobs might get maybe USD 3000 per year, or USD 5000 in the capital. If you make 5 digits you're doing well, like USD 25k per annum for a data scientist or 60k for a head of IT (those would be exceptional top jobs there, mind you). [1]

So, for the median individual in Indonesia it's several decades worth of salary, and it will help the affected families a lot. I assume that the situation in Ethiopia is not too different.

[1] https://www.robertwalters.co.id/content/dam/robert-walters/g...

nopzor• 7 years ago

i agree that it's a paltry amount.

however keep in mind that this initial 'good faith' payment by boeing does not in any way limit the rights that the families have to compensation that results from the legal system.

the actual amount will likely be a lot more than $100m. but we shall have to see.

_ph_6• 7 years ago

The problem is, most airlines who ordered or are considering to order the 737 MAX have not much choice. The only real competitor is Airbus. But not only does Airbus alreay have filled order books, so cannot deliver any additional orders in a reasonable time frame, but also this would move the market into a near-monopoly, something that airlines are trying to avoid strongly, as that would remove their negotiation powers with the manufacturer.

This shows, that a duopoly can be as bad as a monopoly and can degenerate into one quickly. Consequently, it should be avoided as much as possible. Merging Boeing with McDonnell Douglas was a big mistake by these events. As was, not to develop a successor to the 737 even long before the MAX development started. After 40 years, tweaking a very successfull design isn't enough any more, there should be a proper successor.

Unless some more large flaws are discovered, the 737 MAX won't be cancelled and it will be bought. The market is trapped. Airlines, who operate on 737 only will have to change their operations soon, as the MAX can be only a gap-filler now. But on short notice there is no other possible replacement available. Boeing will certainly start a replacment design soon, but that won't arrive till the late 20ies. This might of course be the opening for new aircraft companies to enter the market, e.g. Chineese companies or Japanese.

ethbro3• 7 years ago

In the back and forth, one thing I haven't heard much on is what could have been done to result in a clean-sheet design.

The timeline looks like Boeing was publicly leaning towards a clean sheet redesign until the end of 2011. Then, seemingly out of the blue, American made this announcement on 7/20/2011.

"As part of the Boeing agreement, American will take delivery of 100 aircraft from Boeing's current 737NG family starting in 2013, including three 737-800 options that had been exercised as of July 1, 2011. American also intends to order 100 of Boeing's expected new evolution of the 737NG, with a new engine that would offer even more significant fuel-efficiency gains over today's models. American is pleased to be the first airline to commit to Boeing's new 737 family offering, which is expected to provide a new level of economic efficiency and operational performance, pending final confirmation of the program by Boeing. This airplane would be powered by CFM International's LEAP-X engine."

http://news.aa.com/news/news-details/2011/AMR-Corporation-An...

Afterwards, Boeing fairly quickly announces they'll be offering an up-engined 737 NG design.

Presumably the issues were noted at some point in the development process (~2013?).

At that point... the FAA should have been the one pointing out development issues would cause serious regulatory problems? Afaik, they don't have the funding or personnel for that level of design integration.

And like agile, the farther down the road after that decision we get, the more money is at risk and the more constrained options are.

So the answer here seems like deeper and earlier regulator involvement in the development phase?

I'm honestly having difficulty coming up with a plausible sequence of events that would have resulted in a different outcome. When Airbus released the A320neo mid-development cycle for Boeing, the die seemed cast.

_ph_6• 7 years ago

Yes, I agree. What I meant was, considering that the 737 was designed in the 60ies, they should have a successor development started much much earlier (like 2000). Even with the predecessor of the MAX they were running into ground clearing issues leading to its asymmetric engine housings.

filereaper• 7 years ago

This might of course be the opening for new aircraft companies to enter the market, e.g. Chineese companies or Japanese.

Mitsubishi is making a few moves [1], it recently acquired CRJ from Bombardier.

[1] https://asia.nikkei.com/Business/Company-in-focus/Mitsubishi...

dlgeek• 7 years ago

There was that Bombardier C-Series that was competing with the low end of the 737 market, but Boeing fought so hard against it with the USITC that they were forced to basically hand it off to Airbus.

seldonnn• 7 years ago

Less than a months production. For context, Boeing has over 7 years of MAX production in backlog.

forgotmypw32• 7 years ago

It's either Boeing loses orders or airlines lose the orders. Knowing what I've learned about the 737 just from reading the news and analysis here, I wouldn't want to get on one for a few years after it goes back into flying.

dylan604• 7 years ago

That totally depends on what the fix for the Max becomes. If it is something along the lines of all planes receive the optional equipment as well as software updates that takes into consideration that the human is constantly countering the decisions software makes the human wins, then I'd be okay with it. As it is, you know that all Max pilots have become or are becoming very familiar with how to disable MCAS.

forgotmypw32• 7 years ago

How much testing will the fix undergo before being deployed?

How much testing will each fixed plane undergo before the first passenger flight?

chopin• 7 years ago

For me the main problem is not MCAS but not knowing what else is being hidden from regulators and pilots.

Boeing loses big order for 737 Max aircraft

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