Boeing agrees to a compensation deal with Turkish Airlines

By Ankur Deo | January 5, 2020

Boeing agrees to a compensation deal with Turkish Airlines, by Travel Radar Correspondent Ankur Deo

The Boeing 737 MAX grounding has affected a multitude of airlines far and wide, in ways quite unimaginable. Turkish Airlines is out of the many carriers which had to reschedule and/or cancel a plethora of flights because of this grounding. The airline had taken delivery of 12 737 MAX aircraft before the grounding, out of the 75 on order. Since March 2019, It was supposed to have received 12 more.

To compensate for the losses incurred to Turkish Airlines because of grounded planes and the void created because of unavailability of planned new aircraft, the airline has ended up on a ‘compensation deal’ with Boeing, the carrier said last week. The released report does not specify the exactitude of payment, but Turkey’s ‘Hurriyet’ newspaper stated that it was worth $225m including $150m in compensation, and $75m covering aspects like training and spare parts.

According to analysts, the full damage caused by grounding of the 737 MAX would depend much on when the aircraft returns to service, thereby, making this compensation deal between Turkish Airlines and Boeing peculiar as the aircraft type is still grounded, without any immediate signs for it to get airborne.

‘Either Turkish Airlines has a pretty good feeling for when this will end, or the carrier has somehow lined up alternative capacity to mitigate the damage at this point’ said Richard Aboulafia, Vice President of Analysis at Aviation consulting firm ‘Teal Group’.

Grounded Boeing 737 MAX planes at Istanbul Airport. Image Credits: dailysabah

Turkish Airlines is just one of the number of airlines that have been seeking financial compensation from Boeing for the impact of the 737 MAX grounding. Southwest Airlines, the world’s largest 737 MAX operator, said in December 2019, that it had reached a confidential agreement with Boeing for a portion of the total projected income in 2019; whereas European airline TUI said that it was still negotiating terms and figures with Boeing. TUI said that the grounding had cost them a staggering $329m in last financial year, and figures are rocketing close to $447m for this financial year. The grounding of the 737 MAX has cost Boeing about $9b so far. Boeing has further estimated that it will have to pay more $5.6b over the next few years to compensate airlines for their losses from canceling thousands of flights.

As the Federal Aviation Administration(F.A.A.) is unlikely to approve Boeing’s changes until late February or March 2020, it can be safe to say that the 737 MAX will most probably take off only in second half of the year. With Boeing’s share price having dropped 27% since March 2019 (before the second crash of 737 MAX), and the manufacturer’s board having gone through a shuffle last month, we can very well say these are some towering testing times for Boeing!

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