Why Grounding The 737 Max Hits Southwest Airlines Particularly Hard

Oct 25, 2019

From Texas Standard:

Perhaps no airline has a greater stake in the fate of the Boeing 737 Max than Texas-based Southwest Airlines, which bought 34 of them before the plane’s design issues made national headlines following two fatal crashes.

Darryl Campbell has been writing about this issue for The Verge. He says a bit of code in the airplane’s software kept pilots from being able to control the planes in emergency situations.

“Boeing didn’t even tell them how it worked so they didn’t know what was going on,” Campbell says. “By the time they could figure out what to do, it was too late.”

After the two incidents, the Federal Aviation Administration grounded all 737 Max planes. The grounding has continued for seven months, so far. Campbell says the FAA is making sure the fixed coding inside the plane is fully tested before allowing the planes to take to the skies again.

“The FAA really is wanting to make sure it doesn’t fumble their reputation again,” Campbell says. “This has been the longest grounding of a commercial airliner in history so it seems like they’re definitely not hesitant about taking their time.”

Southwest Airlines has built its entire business model around the Boeing 737, Campbell says. By using one type of airplane, Southwest saves on labor, training and operational costs, which allows them to offer their tickets at a lower price. The grounding of the 737 Max happened while Southwest was conducting a major update to its fleet of planes.

“They’ve committed to having 72 of these planes by the end of next year, so it really was a part of their future plans and now they’re kind of stuck in an upgrade cycle and there’s no good alternative for them,” Campbell says.

Although the company’s third quarter adjusted earnings were better than expected this year, Campbell says Southwest’s real test will come next year., This is because when a third of its operating fleet is expected to be comprised of 737 Max planes, as the company adds new routes to Hawaii and the Caribbean.

“They’re just not able to cover those with some of the planes on hand,” Campbell says. “Either they have to start using these less efficient, smaller aircraft routes which eats into your revenue, or they just have to, if the airplane gets back into service, they have to just hope that all these people aren’t gonna say, ‘Well, I’ve heard about these planes. It sounds real bad and I don’t wanna get on them.’”

American Airlines, also based in Texas, owns grounded 737 Max airliners, too. Campbell says because it operates a mixed fleet, American isn't as affected by this issue as Southwest. But American estimates it will lose $140 million more than expected, because of the groundings.

“These costs are ballooning,” Campbell says. “Airlines are having to scramble for it, and I think American is in a relatively better position only because they don’t have that low cost carrier model of just flying the single airplane type.”

Campbell says other than suing Boeing for damages, Southwest doesn’t have a lot of wiggle room. If the company decides to purchase a different type of airplane,, like the Airbus A320, it would have to hire new pilots and buy new flight simulators. And that would break the Southwest business model.

“It really is expensive to do one of these switches,” Campbell says.

Written by Savana Dunning.