The head of WestJet Airlines Ltd. says the airline is seeking compensation from Boeing Co. for the lost use of its 737 Max passenger jets, but that customers’ expected reluctance to fly in the plane when it returns to service makes the costs impossible to predict.
WestJet, Air Canada and other global airlines are waiting for aviation regulators to approve changes to the Boeing 737 Max, which was grounded worldwide in March after two crashes in five months killed 346 people. Both crashes, in Indonesia and Ethiopia, are linked to the automated flight-control system’s response to erroneous data from a pitch sensor in the nose of the plane.
Boeing says it has made changes to the 737 Max’s software and is working with U.S. and other aviation regulators on the plane’s return to service. But Ed Sims, chief executive of WestJet, said Tuesday that customers’ safety fears pose a hurdle to profitable operations once regulators allow the Calgary-based airline to resume flying its 13 Max planes.
”We have undertaken significant customer research over this period and there is no question the majority of customers we have assessed over this time have strong or some reluctance to get back on board a Boeing Max aircraft,” Mr. Sims said, calling for a “collaborative effort” among Canada’s airlines and Transport Canada to convince Canadians the Max is safe to fly once it has received regulatory clearance.
“I have no hesitation at all, both myself and my family, being on the first flight back into service,” Mr. Sims said. “I don’t think any aircraft in commercial history has been subject to such intense scrutiny, both technical and operational and procedural. So when these aircraft come on board, that hard work will start – to convince nervous travellers of the safety of this aircraft,” he said.
Mr. Sims said he is seeking compensation from Boeing for costs that include lost ticket sales and schedule disruptions as well as damages to the airline’s brand and reputation, but said it is impossible to estimate the entire amount.
“In 2020, some of the most challenging aspects may be still to come – reluctance to get on board, as well as profitability when capacity” is restored, Mr. Sims said.
Despite the loss of its 13 Max planes, WestJet posted a 10.5-per-cent jump in revenue, to $1.4-billion, in the third quarter that ended Sept. 30 and saw profit rise by 70 per cent to $119-million, compared with the same period in 2018, which included restated items owing to the adoption of a different reporting standard. WestJet flew 6.6 million passengers in the quarter, as the average fare-per-mile rose by 8 per cent while fuel costs fell by more than 10 per cent. WestJet shareholders in July approved a $3.5-billion takeover by Onex Corp. Mr. Sims said the deal is awaiting approval by the Canadian Transportation Agency and is expected to be finalized this year.
Larger rival Air Canada said on Tuesday that its third-quarter profit was $636-million, or $2.35 a share, compared with $702-million ($2.55 a share) in the same period a year earlier. On an adjusted basis, profit rose to $613-million ($2.27 a share), from $580-million ($2.10 a share), a year ago.
Air Canada has 24 Max jets and has delayed delivery of another 12. The airline has dropped the plane, which accounts for 24 per cent of its narrow-body fleet, from its schedule until Feb. 14. Air Canada declined to say whether it is seeking compensation from Boeing.
Calin Rovinescu, Air Canada’s CEO, told analysts on a conference call on Tuesday the Montreal-based airline covered 95 per cent of its schedule by leasing planes, adjusting or combining routes and cancelling others.
“There is no doubt the grounding is preventing us from reaching our full potential,” he said.
The airlines revealed the impact of the 737 Max groundings on the same day Boeing’s top executive testified before U.S. lawmakers and repeated his apology to the families whose loved ones died in the crashes. “We are sorry,” said Dennis Muilenburg, CEO of Boeing. “We made some mistakes and we got some things wrong.”
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