FAA clears Boeing 737 Max for service return

The order to suspend commercial service of the Boeing 737 Max has been rescinded by the United States Federal Aviation Administration (FAA).

The move will allow airlines under the regulator's jurisdiction to take the steps required to resume service.

Boeing will be able to start making deliveries as well.

The type of aircraft has been grounded since March last year after 346 people were killed in fatal crashes in Indonesia and Ethiopia.

Over the past 20 months, FAA personnel have worked to recognize and resolve the safety concerns that played a role in the loss of Flight 610 of Lion Air and Flight 302 of Ethiopian Airlines, the body said in a statement.

The FAA said it has cooperated closely with international counterparts on every aspect of the return to service during the process.

David Calhoun, chief executive officer of Boeing, said, "We will never forget the lives lost in the two tragic accidents that resulted in the decision to suspend operations."

"As a result, these events and the lessons we have learned have reshaped our business and focused our attention further on our core values of safety, quality and integrity."

Boeing has worked closely with airlines over the past year and a half, supplying them with comprehensive long-term storage guidelines and ensuring their feedback was part of the plan to safely return the aircraft to service.

An airworthiness directive issued by the FAA specifies the criteria that must be met before service can be resumed by United States-based carriers.

Changes include the implementation of software upgrades, the completion of modifications to wire separation, the conduct of pilot training and extensive de-preservation exercises to ensure that airplanes are ready for service.

"The FAA Directive is an important milestone," said Stan Deal, Boeing Commercial Airplanes' president and chief executive officer.

"We will continue to work with regulators around the globe and with our customers to return the aircraft to worldwide service."

"Commenting on the news, Rob Morris, Cirium's global head of consultancy Ascend, said: "Although there is currently no demand for the Boeing 737 Max in the sense of fleet expansion, there are a couple of drivers in demand for new aircraft once the aircraft is returned to service later this week, which will mean that Boeing can start deliveries again.

"The first argument is that, of course, the aircraft will be about 15% more fuel efficient than the 737-800s it will replace.

While today's fuel prices are low and demand is also reduced beyond 2019 levels, fuel savings may still account for anything like $750-$1,000 per day per aircraft.

"That would soon multiply to savings in excess of $1 million per month for an operator like Southwest or United, which is very welcome in today's environment where airlines want to keep as much cash as possible."

Cirium data shows that 383 Boeing 737 Max aircraft are currently waiting to return to service, but not all are focused on U.S. carriers and may therefore have to wait for further regulatory approval.

There are also about 450 aircraft that were constructed, but were not delivered to airlines.

Morris added: "Airlines taking delivery of the new Boeing 737 Max will immediately be able to offer the aircraft on the market for sale and leaseback."

We have already seen an appetite for the sale and leaseback of Max with many lessors, and hence these airlines will be able to release the money they have paid for the aircraft (deposit, PDP, final payments) and maybe even book an immediate sales profit.

There are several airlines, such as Spicejet, whose business model relies on delivery sales and leasing, and these airlines will be very happy to see the Max back in service and deliveries available again.

Although there is currently little demand for the Boeing 737 Max at face value, we expect to see a handful of new deliveries this year and then something like 360 or so next year, which will include about 200 of the pre-built aircraft once it is returned to service.

"We expect the 737-800 to be replaced effectively on a one-for-one basis."

Steve Dickson, FAA administrator, addresses the final conditions for authorizing the grounded 737 Max airliner to return to commercial operation.

TripNumbers is designed to help you plan a better holiday by collecting travel costs for different destinations around the world. If you're travelling on a budget or looking to splurge in a luxurious resort, TripNumbers can help you understand how to get the most out of your money.