American Airlines extends Boeing 737 MAX cancellations

The airline cut its annual profit forecast in April, blaming an estimated $350 million hit from the MAX groundings. (AFP/File)
Updated 15 July 2019

American Airlines extends Boeing 737 MAX cancellations

  • Decision follows aviation authorities’ discovery of a new flaw last month

NEW YORK: American Airlines Group Inc. said on Sunday it is extending for a fourth time cancellations of about 115 daily flights into early November due to the ongoing grounding of the Boeing Co. 737 MAX jets.

The airline’s decision was expected after the Federal Aviation Administration, which must reapprove the jets for flight following two fatal crashes, last month uncovered a new flaw that Boeing estimates will take until at least September to fix.
“American Airlines remains confident that impending software updates to the Boeing 737 MAX, along with the new training elements Boeing is developing in coordination with our union partners, will lead to recertification of the aircraft this year,” the airline said in a statement on Sunday.
American, the world’s largest airline and the second largest MAX operator in the US, most recently had planned to keep the MAX, which it used on most flights between New York’s LaGuardia airport and Miami, off its schedule through Sept. 3. It has been substituting other aircraft for its busiest flights while canceling others and temporarily suspending direct flights between Oakland, California, and Dallas-Fort Worth.
Some analysts have said they do not expect the MAX jets to fly again before the end of the year.
American, with 24 737 MAX aircraft and dozens more on order, is scheduling without the jets through Nov. 2. Among other US MAX carriers, Southwest Airlines Co. has removed the aircraft from its scheduling through Oct. 1, and United Airlines Holdings until Nov. 3. Southwest is the world’s largest MAX operator.
The 737 MAX, which had been Boeing’s fastest-selling aircraft thanks to its fuel-efficient engines and longer ranger, was grounded worldwide in March after an Ethiopian Airlines plane plunged to the ground soon after takeoff, five months after a similar Lion Air fatal crash off the coast of Indonesia.

HIGHLIGHTS

• American, with 24 737 MAX aircraft and dozens more on order, is scheduling without the jets through Nov. 2.

• Boeing hopes a software upgrade and new pilot training will add layers of protection.

Boeing hopes a software upgrade and new pilot training will add layers of protection to prevent erroneous data from triggering a system called MCAS, which was activated in both the planes before they crashed.
American, which is also grappling with cancellations related to a labor dispute with its mechanics, is due to report second-quarter results later this month, with an expected rise in unit revenues as capacity constraints mean its planes are flying fuller.
However, the airline cut its annual profit forecast in April, blaming an estimated $350 million hit from the MAX groundings.
American’s chief executive, Doug Parker, has been among the most vocal supporters of the MAX aircraft, saying on June 12 that it was “highly likely” flights would resume by mid-August.


IMF downgrades outlook for world economy, citing trade wars

Updated 15 October 2019

IMF downgrades outlook for world economy, citing trade wars

  • Growth this year will be ‘weakest since the 2008 financial crisis,’ according to 2020 forecast

WASHINGTON: The International Monetary Fund is further downgrading its outlook for the world economy, predicting that growth this year will be the weakest since the 2008 financial crisis primarily because of widening global conflicts.

The IMF’s latest World Economic Outlook foresees a slight rebound in 2020 but warns of threats ranging from heightened political tensions in the Middle East to the threat that the US and China will fail to prevent their trade war from escalating.

The updated forecast released on Tuesday was prepared for the autumn meetings this week of the 189-nation IMF and its sister lending organization, the World Bank. Those meetings and a gathering on Friday of finance ministers and central bankers of the world’s 20 biggest economies are expected to be dominated by efforts to de-escalate trade wars.

The new forecast predicts global growth of 3 percent this year, down a 0.2 percentage point from its previous forecast in July and sharply below the 3.6 percent growth of 2018. For the US this year, the IMF projects a modest 2.4 percent gain, down from 2.9 percent in 2018.

Next year, the fund foresees a rebound for the world economy to 3.4 percent growth but a further slowdown in the US to 2.1 percent, far below the 3 percent growth the Trump administration projects.

IMF economists cautioned that that even its projected modest gains might not be realized.

“With a synchronized slowdown and uncertain recovery, there is no room for policy mistakes, and an urgent need for policymakers to cooperatively de-escalate trade and geopolitical tensions,” Gita Gopinath, the IMF’s chief economist, said in the report.

Last week, the US and China reached a temporary cease-fire in their trade fight when President Trump agreed to suspend a tariff rise on $250 billion of Chinese products that was to take effect this week. But with no formal agreement reached and many issues to be resolved, further talks will be needed to achieve any breakthrough. The Trump administration’s threat to raise tariffs on an additional $160 billion in Chinese imports on Dec. 15 remains in effect.

The IMF’s forecast predicted that about half the increase in growth expected next year will result from recoveries in countries where economies slowed significantly this year, as in Mexico, India, Russia and Saudi Arabia.

This year’s slowdown, the IMF said, was caused largely by trade disputes, which resulted in higher tariffs being imposed on many goods. Growth in trade in the first half of this year slowed to 1 percent, the weakest annual pace since 2012.

Kristalina Georgieva, who will preside over her first IMF meetings after succeeding Christine Lagarde this month as the fund’s managing director, said last week that various trade disputes could produce a loss of about $700 billion in output by the end of next year or about 0.8 percent of world output.

IMF economists said that one worrying development is that the slowdown this year has occurred even as the Federal Reserve and other central banks have been cutting interest rates and deploying other means to bolster economies.

The IMF estimated that global growth would have been about one-half percentage point lower this year and in 2020 without the central banks’ efforts to ease borrowing rates. “With central banks having to spend limited ammunition to offset policy mistakes, they may have little left when the economy is in a tougher spot,” Gopinath said.

In addition to trade and geopolitical risks, the IMF envisions
threats arising from a potentially disruptive exit by Britain from the EU on Oct. 31. The IMF urged policymakers to intensify their efforts to avoid economically damaging mistakes.

“As policy priorities go, undoing the trade barriers put in place with durable agreements and reining in geopolitical tensions top the list,” Gopinath said. “Such actions can significantly boost confidence, rejuvenate investment, halt the slide in trade and manufacturing and raise world growth.”

The IMF projected that growth in the 19-nation euro area will
slow to 1.2 percent this year, after a 1.9 percent gain in 2018. It expects the pace to recover only slightly to 1.4 percent next year.

Growth in Germany, Europe’s biggest economy, is expected to be a modest 0.5 percent this
year before rising to 1.2 percent next year.

China’s growth is projected to dip to 6.1 percent this year and 5.8 percent next year. These would be the slowest rates since 1990, when China was hit by sanctions after the brutal crackdown on pro-democracy demonstrators in Beijing’s Tiananmen Square.