Insight: Thursday 20 August 2020: A MAX Order and Possible Rebranding?

News:
There is joy in Seattle as Boeing has finally generated a new order for the 737 MAX. The order comes from an existing MAX customer. Enter Air, a low-cost carrier in Poland, placed an order for two MAX 8 and two options. The company currently operates a fleet of primarily older 737s, with its two existing MAX models currently grounded.

Interestingly, in the press conference, the airline and Boeing both referred to the aircraft as the 737-8 rather than the MAX. With concern over customer reaction to the MAX, it appears Enter Air may follow Ryanair’s lead in using the aircraft number rather than MAX on the fuselage and in communications. Ryanair changed the logo on some aircraft from 737 MAX to 737-8200 to reflect its order of the high-density version of the 737-8, the 737-8-200. It appears that Enter Air may do the same.

Analysis:
The resumption of orders for Boeing is a positive situation, even if it is for only four airplanes. But in the midst of massive cancellations and the impacts of the pandemic, any order is a positive sign. Maintaining the MAX customer base is critical for Boeing, with more than 800 orders disappearing from their backlog this year. The airline industry remains in deep trouble, and several airline failures or bankruptcies are likely over the next year. This is a confidence builder for Boeing but comes with a caveat.

The potential re-branding of the MAX will likely be a customer by customer issue, as Boeing has previously stated that it does not want to re-brand the MAX. But at customer announcements, such as this one, Boeing tended to avoid the M-word and used the customer preferred 737-8 language on several occasions. This has caused some to speculate that Boeing could reconsider its decision not to rebrand the aircraft.

What is unknown at this point is how the traveling public will react to the MAX, and whether they believe, after an 18-month grounding, that it will be safe. In prior extended groundings, such as the DeHavilland Comet, Lockheed Electra, and Douglas DC-10, the traveling public took 6-12 months to come back and accept the airplane as safe. But today, the pandemic, combined with the availability of social media, could create a consumer backlash or boycott of the MAX. A rebranding to MAX2, indicating the new version, could be helpful.

Insight:
It has always been clear that the MAX will come back to the market and be successful. The question for Boeing is how successful, given the backlog differential with the A320neo family, which has continued to grow while the MAX has been grounded. The market share is now tilted towards a 60%-40% Airbus advantage, and future orders reflect an even higher potential shift. Boeing will need a strong recovery once the MAX is re-certified, but will find orders difficult to come by during the global pandemic. With traffic not expected to return to 2019 levels until 2024, Boeing is facing some difficult times as it reschedules the delivery skyline and lowers production rates to adjust to weaker airline demand.

We believe Boeing should rebrand the MAX, and be transparent that the MAX2 or whatever brand is chosen has been thoroughly vetted by not only the FAA but by a team of international regulators as well. As one of the most examined aircraft in history, there would be a positive spin to the story to tell. But we don’t see that forthcoming from either Boeing or some of its large customers like American Airlines. The company may be missing an opportunity to solidify a weaker market position.

Ernest Arvai

+ posts

President AirInsight Group LLC