Question

The current issue we are going to look at is boeing's current issue with the safety of their 737 MAM jet. Last week one of their 737 crashed and killed over 150 people on Etheopian Airlines. How might this current international issue affect boeings international marketing decisions?

Answer 1

With investigations under way into two crashes of Boeing’s 737 MAX 8 aircraft, the US manufacturer has caved to pressure and grounded the entire global fleet totalling 371 planes. That includes both model 8 and 9 versions of the aircraft.

President Donald Trump’s order on Wednesday prompted the Federal Aviation Authority to ground all 737 MAX aircraft flying in and out of the US.

nes face disruption almost every day: airline operation is a complex system. Disruption can be caused by unforeseeable weather conditions, unexpected technical or mechanical issues of an aircraft, or associated safety hazards or security concerns.

Airlines therefore have strategies in place to manage or at least mitigate the effect of the disruption and reduce any potential delays. This could include but is not limited to:

• changing or swapping an aircraft type

• combining two or three flights into one operation

• arranging alternative flights for travellers

• moving travellers to other airlines if their tickets have been issued.

With only 371 Boeing 737 MAX family jets in operation, this is a small percentage of the total of more than 6,000 of the previous modeland gives airlines the ability to use other jets in their fleet as a replacement.

But the current suspension will present significant challenges for some airlines.

Subject to their fleet size, the scope of their network, and other resources and capacity available, big airlines with multiple types of aircraft in their fleet are more capable of managing such disruption.

For example, Air China, China Eastern, China Southern, American Airlines and Southwest will have more resources to arrange for travellers to fly to their destinations.

In contrast, low-cost or regional carriers will be limited in their capacity to manage the disruption.

For instance, SilkAir and Fiji Airways have six and two Boeing 737 MAX aircraft in their respective fleets. Grounding the model means that both carriers will lose 16% of their total capacity.

Potential risks

The risk for Boeing now is the potential consequences flowing from any investigation into the aircraft crashes. These could include:

• complete or partial cancellation of orders placed by global airlines yet to be delivered

• litigation by the affected airlines and the victims of the ill-fated aircraft, seeking damages caused by any product defect (if proof of any defect could be established)

• new opportunities for its rivals to promote their aircraft; this could allow, for example, China’s state-owned aircraft manufacturer, COMAC, to make new waves in the industry.

  Regardrdless, Boeing could face enormous financial losses and devastating economic consequences.

  Boeing’s shares dropped after the Ethiopian Airlines crash on Sunday, but have started to recover.

  While Boeing surely carries enough insurance coverage for losses, it is inevitable the damage to its brand is more far-reaching in the medium to long term. This will affect the confidence of aircraft operators and the general public.

  Even if any technical defects discovered are quick to fix, a damaged brand tends to require more time and much more significant efforts to recover.