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Thu 27 Feb 2020 08:49 AM

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Boeing in talks with prominent customers to fund 737 Max simulator ahead of return

Flydubai is in talks with the Boeing about compensation terms, as it awaits FAA and GCAA directives

Boeing in talks with prominent customers to fund 737 Max simulator ahead of return

Flydubai said it’s waiting on the FAA and its own regulatory authority to issue directives before commenting on simulator and training requirements.

Boeing is in talks with prominent customers about funding simulator training on the 737 Max once it’s cleared to fly again, in a bid to mollify airlines frustrated by a global grounding approaching a year in length.

The planemaker has told India’s SpiceJet Ltd. that it will cover the cost of putting pilots through sessions on the machines, which sell for as much as $20 million, while Flydubai and Ryanair Holdings are in talks on the matter, according to people familiar with the discussions. The carriers are among the top Max buyers with almost 600 orders in total.

Negotiations are being conducted on an airline-by-airline basis, Chaz Bickers, a Boeing spokesman, said in response to questions from Bloomberg. The talks include provision of services such as training to offset costs from the Max’s idling, he said.

Compensation

Boeing has repeatedly missed targets for re-certifying the Max, grounded since March after two fatal crashes. The company has set aside $8.2 billion to cover compensation to carriers forced to reschedule thousands of flights and shelve growth plans. The figure was increased by $2.6 billion after the Chicago-based planemaker last month accepted that Max pilots would benefit from simulator training, and the Federal Aviation Administration is expected to make it mandatory for the jet’s return.

The Allied Pilots Association, which represents American Airlines crew including 4,200 who fly 737s, said funding for Max simulators would be welcome and that it can make the difference between an in-flight situation being recoverable or not.

“Muscle memory doesn’t happen by reading manuals or experiencing creative computer-based training modules,” spokesman Dennis Tajer said. “Obviously Boeing has come to the conclusion it’s not satisfactory for this. We agree.”

Boeing climbed 2.4% to $311.42 at 10:04 a.m. in New York. Through Tuesday, the shares had tumbled 28% since the second Max crash, the second-worst decline on the Dow Jones Industrial Average.

Returning to service

Planning to line up flight simulators for Max operators began last year, before Boeing officially reversed course to support additional training for pilots, Dave Calhoun, the company’s new chief executive officer, told reporters last month.

“We are working closely with customers to support their training needs as we work towards safely returning the 737 Max to service,” spokesman Bickers said.

SpiceJet Chairman Ajay Singh said February 12 that Boeing is paying for a simulator to be set up in India. Flydubai, which has already received one machine, is in talks with the planemaker about compensation terms, a person with knowledge of the negotiations said. Both are among clients that have threatened to defect to Airbus.

Ryanair is also in discussions with Boeing on funding for simulator sessions, one person said. Europe’s biggest discount airline already has two machines at London Stansted but may need one at its Dublin base.

Good position

Flydubai said it’s waiting on the FAA and its own regulatory authority to issue directives before commenting on simulator and training requirements. Ryanair said it’s in-house machines mean it will be in a good position to train its pilots once the Max is certified as fit to fly.

There are currently 36 Max simulators worldwide, including eight at Boeing training centers in Miami, London, Shanghai, Singapore and Istanbul. Two more should be operative by mid-2020, while customers around the globe are also purchasing and installing additional machines, Bickers said. While that compares with 80 simulators for the earlier 737 NG, it should be sufficient for every Max user to train and retrain pilots, marketing executive Randy Tinseth said February 12.

Boeing, which now expects the Max to return mid-year, revised its view in favor of the model’s pilots undergoing simulator training after inviting aviators to test redesigned flight-control software.

Hot property

Some airlines with a machine may be asked to make it available to others, though the devices will be a hot commodity at carriers like Southwest Airlines, American Airlines Group and United Airlines Holdings, which need to put thousands of pilots through their paces.

American said it will need full use of its one Max simulator, given the pilots it needs to train. The company expects to be reimbursed by Boeing for all financial impacts of the grounding, including simulator sessions, spokesman Ross Feinstein said. American reached a confidential settlement for Max costs in 2019, when the plane’s absence shaved $540 million from pretax income.

Southwest, the largest Max operator, is preparing for several scenarios on pilot training as it waits on the FAA decision, according to spokesman Chris Mainz, who declined to comment on any talks with Boeing regarding compensation. The carrier will have nine simulators by April and aims to have all of them operational by July 1.

CAE, the biggest simulator maker, said in November it had begun to make machines for the 737 without orders in hand, believing more instruction would be needed. Training is likely to include the Max’s maneuvering characteristics augmentation system, known as MCAS and blamed for bringing down the crashed jets after it intervened in response to faulty sensor readings.

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