As the Max Grounding Comes to a Halt, what next? An Aircraft Insurance perspective.

Boeing appears to be close to bringing the Max back into service. The software changes have been tested. Here are 2 significant impacts of the Max saga in the Aircraft Insurance industry:

The Max Replacement

The impact on the Boeing company has been tremendous, reportedly up to $1B in outlook changes, not counting the costs to correct the problem: https://www.reuters.com/article/us-boeing-results-idUSKCN1S01GP

This implies Boeing will now have to finally design an all-new competitor to the A-320 tranche of commercial aircraft. While this will make it costly both for Boeing and their Customers that will eventually have to replace the current 737 fleets, it also implies that we should see an even safer jet than the 737. Despite the 2 Max losses and other 737 tragedies, the jet remains one of the safest aircraft every created. The safety will translate into lower accident rates. But this will not really have an effect until that next generation is fully operational, probably 20 years out.

The Grounding Liability Claim

Using the formula in our post from March 14 ($47M per day and guessing $25M per day after fixed costs are subtracted), the impact on the Aircraft Insurance market is now calculated at approximately at $1,050,000,000 to date. Assuming the jet returns to service in another month that will be a total impact of $1.8B. A very big hit for the Aircraft Insurance industry. An industry that is already well into a hard market that we project will last 3-4 years.

It cannot be understated what a tremendous impact this will have on the Aircraft Insurance marketplace due to the unfortunate timing and size of the grounding claim.

Personally we believe the Max will be the safest 737 after its return to service. Nonetheless a new design will actually deliver the costs savings that the MAX delivers but without any compromises in safety or performance.