Chinese Airlines Consider Teaming Up for Boeing 737 Max Compensation

(Bloomberg) -- China’s biggest airlines are considering banding together to seek compensation from Boeing Co. for the disruption caused by the grounding of the U.S. aircraft manufacturer’s 737 Max, people with knowledge of the matter said.

Air China Ltd., China Southern Airlines Co. and China Eastern Airlines Corp. are exploring their legal options on how to coordinate their claims, according to the people, who asked not to be named discussing private deliberations. The talks are preliminary and may not result in an agreement, the people said.

China’s “big three” state-run carriers are potentially a formidable force to contend with. They operate 53 of the 96 Max planes currently grounded in the country, according to data from VariFlight, a local aviation statistics company. The carriers also accounted for 65% of passengers who flew Chinese airlines in 2018, according to the Civil Aviation Administration of China.

A coordinated approach could give the airlines more leverage to gain concessions as China’s influence in the aviation world keeps rising. The country was the first major authority to ground Boeing’s top-selling 737 Max in March, despite assessments by the U.S. authority at the time that the plane was safe to fly, and upending a decades-long tradition among air safety regulators.

Proposed Fix

It’s not clear when the Max might return to service. U.S. aviation regulators expect to receive Boeing’s proposed software fix for the aircraft as soon as next week, and will then begin a review that will include test flights and input from a technical advisory board.

“We will not allow the 737 Max to fly in the U.S. unless it is absolutely safe to do so,” Daniel Elwell, acting administrator of the Federal Aviation Administration, told lawmakers Wednesday without offering an estimate for how long the review would take.

Representatives from China Eastern, Air China, China Southern and Boeing declined to comment.

Chinese carriers including Xiamen Airlines Co., Hainan Airlines Holding Co., Shenzhen Airlines Co. and Shandong Airlines Co. have also taken delivery of the Max, while Ruili Airlines Co., Donghai Airlines Co. and Okay Airways Co. are awaiting their first jets.

It’s not unusual for Chinese carriers to coordinate. For example, they typically buy aircraft through a centralized, government controlled body, with planes later allocated to specific operators.

©2019 Bloomberg L.P.