Ethiopian Airlines has announced that it plans to put its Boeing’s 737 Max back to service for the first time since the aircraft model was involved in a crash that claimed 157 lives three years ago. Chrystal Zhang has studied the business models of airlines. We asked her to make sense of the source of Ethiopian Airlines’ confidence.

When, and why was Boeing’s 737 Max grounded?

By 12 March 2019, two days after Ethiopian Airlines flight 302 crashed, civil aviation authorities in China, Australia, Britain, France, Germany, Ireland, Malaysia, Mongolia, Oman and Singapore had already grounded the 737 Max.

This was in addition to airlines in Brazil, South Africa, South Korea, Norway, India, Turkey and other countries. On March 13, 2019, the US Federal Aviation Administration grounded the entire 737 Max fleet.

The decision was made following the fatal crash of Ethiopian Airlines’ 302 flight enroute from Addis Ababa to Nairobi. The accident killed all 157 passengers and crew members on board.

This wasn’t the Boeing 737 Max aircraft’s first incident.

On 29 October 2018 there was a fatal crash of a flight operated by Lion Air, an Indonesian low-cost carrier. The airline was enroute from Jarkata to Pangka Pinang and the crash resulted in 189 casualties.

Two years earlier, in March 2017, the US Federal Aviation Administration had granted an amended-type certificate to Boeing for the 737-8 aircraft, the first of the 737 Max family. An amended type certificate approves modification, and how such modification affects the original design. The Max is the fourth generation of the 737 model airplane, and is the successor to the company’s 737 Next Generation family of aircraft.

The 737 Max was the 12th derivative model of the 737 aircraft, which was first certified half a century earlier in 1967. Two months after the US Federal Aviation certification, the first 737 Max entered revenue passenger service with Malindo Air, a Malaysian air carrier. Seventeen months later the 737 Max suffered its first fatal crash.

Is there a consensus on the cause of the accidents?

A study has analysed the cause of the 737 Max crashes. The model had a new feature in its flight control computer – the manoeuvring characteristics augmentation system – that has become the centre of scrutiny for Max crashes.

The new system had an ability to trigger flight control movements that challenged the pilots’ command of the aircraft. In addition, the software operated on input from one of the two sensors externally mounted on either side of the aircraft’s fuselage (main body).

For Ethiopian flight, the system triggered four times as a result of false sensor readings, forcing the airplane into a nose down from which the pilots were unable to recover. Faulty sensor data that erroneously triggered the system to repeatedly activate landing played critical roles in the Max crashes.

Given significant advances in aviation safety over the last two decades it was extraordinary for two new airplanes, of a new derivative model, to crash within five months of each other.

While certain facts and circumstances surrounding the accidents differed, a common component in both was the new flight control feature.

Boeing developed the system to address stability issues in certain flight conditions induced by the plane’s new larger engines and their relative placement on the 737 Max aircraft compared to the engines’ placement on the 737 NG.

Is Ethiopian Airlines jumping the gun?

So far, 13 airlines have resumed flying Boeing’s 737 Max. These include The Ryanair Group of Ireland, Air Canada, American Airlines, Alaska Airlines and India-based SpiceJet.

In the case of Ethiopian airlines, the reasons for resuming its flights include:

• The action taken by both Boeing and the US Federal Aviation Administration in terms of product redesign, pilot training requirements, commitment to corporate culture change and certification. These seek to ensure that the aircraft model satisfies all regulatory requirements.
• Boeing’s 737 Max has its unique market positioning to serve the short-medium haul market
• The aircraft is more economically viable for airlines to use to serve their target market
• The airline had made financial commitment to aircraft procurement

Have the crashes been fully analysed and resolved?

The US House Committee on Transportation and Infrastructure conducted an 18-month investigation into design, development, and certification of the 737 Max aircraft, and related matters.

The Committee’s investigation has revealed multiple missed opportunities that could have turned the trajectory of the Max’s design and development toward a safer course. The model resulted from flawed technical design criteria, faulty assumptions about pilot response times, and production pressures.

Boeing failed in its design and development of the Max. The US Federal Aviation Administration, on the other hand overlooked its aviation safety mission. It failed in its oversight of Boeing and its certification of the aircraft.

At the direction of Committee Chair Peter DeFazio and Subcommittee on Aviation Chair Rick Larsen, the 245-page report is being released to help inform the public’s understanding of what went so horrifically wrong and why.

What are the lessons learnt?

Never be complacent: Boeing is renowned for its disruptive innovation and novel products. It has served the global aerospace and aviation markets throughout its one-century history. But the company has become more of a financially successful business than a great engineering firm. It was the intent of Harry Stonecipher, its President and Chief Operation Officer in 2004, who championed the corporate culture change. But past glory does not warrant future success. Staying competitive in the market requires innovation, but more importantly, respect and protection of customers and stakeholders.

Do things right and do the right things: These are the fundamental ethical values that a good engineer upholds to be accountable for the safety, health, and welfare of the public. Driven by the desire to outpace its rivals – while designing, developing and introducing B737 Max to the market – Boeing failed to meet both criteria. Boeing, and any other business, need to adhere to these fundamental values and be accountable for its conduct.

Improve safety cultures: There is an ongoing debate that upholding highest safety standards and nurturing safety culture jeopardises a business’s financial success and operational efficiency. However, safety is the foundation of aerospace and aviation business. A safety culture ensures trust, accountability and responsibility. It eventually leads to a firm’s sustainability.

Face the truth and act honestly, and with integrity: When in a crisis, the most effective way to win trust from the public and society is to face the truth and act honestly and with integrity. Any attempts to cover up the truth or mislead the public are doomed to fail.

Source: The Conversation

Africa has 357 airlines, the top 10 of which carried more than 60% of traffic. This reflects the fact that many airlines on the continent are very small: some have as few as two aircraft. Between them the airlines carried 95 million passengers in 2019, according to Routes, an online source of information on route announcements.

Airlines operating on the continent face particular challenges.

Firstly, the industry has to contend with huge disparities in economic and air transport development. There is also an uneven distribution of international air passenger traffic across regions and within countries. The traffic is predominantly centered in a few hubs in North, East and South Africa; and in the large and medium-size cities.

Other challenges include high costs of operation, market protectionism as well as safety and security concerns.

There are very few profitable African airlines. In 2020, only the Ethiopian Airlines made a profit in the continent. And with financial woes compounded by COVID-19, it is likely many more airlines will go under.

Two of the continent’s biggest carriers – South African Airways and Kenya Airways – are under financial stress. Both have made significant losses over the past few years and lost market share and destinations to competition. South African Airways came close to being wound up, but for its part Kenyan Airways reported losses of $333 million for the 2020 financial year.

In November, the two national airlines signed a Strategic Partnership Framework, formalising their plan to set up a pan-African airline in 2023.

In my view the partnership will only succeed if certain conditions are met. The two most important ones are that, firstly, there must be strong national and political agreement and will. But, secondly that the tie-up must be driven by the private sector.

My recent research on Air Afrique’s failure found that the airline was doomed by conflicting national objectives and some of the 11 participating countries were unhappy with what they called a subordinate role.

The case for a partnership

A range of academic studies show that alliances affect the production costs of participating airlines through economies of scale (by means of joint operations of air and ground services), increased traffic density (through network expansion and additional traffic feed) and scope (through increased reach and efficient connections).

Joint ventures, have been, and will continue to be, the key in the future development of airline business. Air France and KLM are good examples why airlines are better off working together. Both have experienced significant growth since getting together in 2004.

Some of alliance arrangements may lead to a reduction in costs and increased efficiency. But they do not necessarily lead to a reduction in competition in the market.

Apart from these benefits, an alliance between South African Airways and Kenya Airways would be good for a number of reasons specific to Africa.

Firstly, it would help them overcome some of the existing market challenges, such as market access restrictions, increased competitions from major non-African airlines such as Turkish Airlines, Emirates and Europeans carriers.

Secondly, the alliance could take advantage of a return to pre-COVID travel levels. The International Air Transport Association anticipates a full return to 2019 air traffic levels in late 2023.

And it’s estimated that air transport will grow on average by 3.2% over the next decades in Africa and by 4.8% if African States implement the Single African Air Transport Market.

Thirdly, it would enable them to create and encourage a market services specialisation among airline operators. Airlines may specialise on feeder services and fly destinations with smaller demand and catchment areas. An example of this type of specialisation include the interlining agreement between Ethiopian and Airlink.

In my view, the cooperation deal would also improve the financial viability of the two national airlines. They could pool maintenance services and reduce costs by pooling purchases, sales and financial transactions. It would boost customer volumes if cost savings were passed on to customers by means of lower fares.

Introducing services in the South African market would be a great addition for Kenya Airways and vice versa. With their hub-based model, (a hub is a central airport that flights are routed through), cooperation will help to boost the route networks of both airlines across Africa.

Why alliances fail

Many alliances don’t achieve the desired outcome. Examples include KLM – Alitalia, and the European Quality Alliance which brought together Air France, SAS and Swissair.

Alliances fail for various reasons. Studies show that ineffective governance, insufficient quality of alliance members and internal competition in the alliances are the most common reasons.

Other studies show that more than 50% of strategic alliance fail due cultural differences, mistrust or poor operational integration.

In the case of Africa, the two airlines have to contend with the fact that there isn’t a single African air transport market. Most of the continent’s 54 countries have their own national arrangements or have under-performing state-owned airlines, resulting in protectionist policies.

There is hope that this will change. The Single African Air Transport Market, which by November last year had been signed by 35 countries, envisages a share aviation space. This would enable eligible airlines from one African state to fly into another using only a prior notification procedure.

But there’s a great deal of work that still needs to be done for this to become a reality.

A number of other factors could stymie the proposed alliance.

A big one is the governance structure, which is the oversight required to make and implement decisions essential to the success of an alliance. Elements of governance include legal form, communication structures, cultural differences, trust and commitment.

Yet another factor will be the extent to which the two governments allow efficient decision making to happen. Airline managers should be left to select a course of action – and then to get on with it. This could be difficult given that the state owns substantial stakes in South African Airways; same case with Kenya Airways where the Kenyan government’s share holding is 48.9%.

Other factors include trust, transparency and communication about what both airlines do together and what they don’t do together. Establishing trust and ensuring that both airlines understand each other’s goals and objectives and that they are the same is key.

Recipe for success

A strategic alliance is similar to a marriage. In most cases there is no perfect match. To be successful partnerships must be nurtured and well managed. Mapping out all the stakeholders that are relevant to the story and are going to help the partners achieve the key performance indicators set out in the alliance is paramount.

In my opinion, setting clear performance measures is important, as they will set the partners on a path that is measurable.

Source: The Conversation