North American airlines operating the Boeing 737 Max are in the throes of creating plans to ease the continuing commercial ramifications from the worldwide grounding the fleet in Mar-2019. Those operators have accepted the fact that the aircraft, once defined as a game changing narrowbody, will remain out of commission for the busy North American summer high season.
Among North American operators, Air Canada has the second largest fleet of 26 jets behind Southwest Airlines’ grounded fleet of 34 aircraft. WestJet has 13 inactive MAX aircraft and Sunwing Airlines’ grounded fleet encompasses four aircraft (all figures are taken from the CAPA – Centre for Aviation Fleet Database as of early May-2019).
Air Canada has outlined numerous network changes it has made to ensure the impact of the grounding is minimal. Airline executives recently explained its 24 MAX-8 jets represent 20% of its narrowbody fleet, and when in operation, transported 9,000 to 12,000 passengers per day.
After the grounding in Mar-2019, Air Canada used various measures to protect approximately 98% of its flying through 30-Apr-2019. Some of those mitigation measures include consolidating trans-continental flights within Canada with larger aircraft, and beginning in May-2019, deploying its LCC subsidiary Rouge on select routes and frequencies.
For 2Q2019, Air Canada estimates it has covered 96% to 97% of the MAX capacity, leaving a 3% to 4% shortfall. Its CEO Calin Rovinescu recently stated there is always a balance between consolidating several flights into larger gauge aircraft with respect to giving up frequencies. Giving up those frequencies means fewer connections, and Mr Rovinescu explained during the last few years “we’ve been building up our strategy around connecting passengers in our hubs”.
The airline has been forced to make several other schedule adjustments due to the worldwide grounding of the aircraft. During Apr-2019 and May-2019 it placed larger jets on services to Honolulu and Maui, and starting in Jun-2019, Omni Air International will operate 767 widebodies on behalf of Air Canada on those two routes to Hawaii from its Vancouver hub.
Air Canada has also pushed back the launch of service from Montreal to Bordeaux, and has brokered a wet lease deal with Qatar Airways for the operation of flights from Montreal to Barcelona and Paris. Other changes include the temporary suspension 737 MAX flights from Halifax and St Johns to London Heathrow and suspension of other seasonal flights during the 2019 summer season.
Management at Air Canada has also warned that the effects of a prolonged Max grounding, particularly during the busy summer season, will create pressure on its unit cost performance. Those pressure points include lower capacity growth, wet lease costs and lower efficiency of aircraft leases that the airline has extended through the summer season. Air Canada has extended leases for three Airbus A320s and three Embraer 190s that were slated to exit its fleet.
Elsewhere in Canada, WestJet’s 13 MAX jets represent 10% of its narrowbody fleet, 7% of its total fleet and 10% of its total system capacity. The airline’s flight schedules reflect the removal of those aircraft from service through 2Q2019, and WestJet says it has covered 96% of its capacity for that time period.
It is now working on a contingency plan for the busy summer travel period in Jul-2019 that includes utilising its entire fleet to mitigate the loss of MAX capacity. The company has also opted to extend a single 737 lease until the end of Jul-2019 to bridge the capacity gap for the summer high season.
WestJet is joining other airlines in determining the Max grounding has affected its all important close-in yield during 1Q2019. This view is shared by Southwest Airlines whose president Tom Nealso also recently stated the airline recorded fewer close in bookings during 1Q2019 due to reduced inventory. Similarly, executives at American Airlines also concluded its MAX flights that have been cancelled were higher yielding and it is reaccommodating customers into seats that would have sold at higher fare levels.
The measures North American operators are adopting are just a snapshot of what MAX customers are experiencing worldwide. It remains to be seen exactly when the aircraft will return to service, but there is no doubt airlines hope their remedies to combat the grounding remain short term measures.