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The 737 Max problems might prompt Southwest to change a key business strategy

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southwestDallas Morning News

Editor’s note, April 25, 2019: Southwest Airlines Chief ExecutiveGary Kelly opened the door today to a fundamental change in the Dallas airline’s business model by using aircraft other than the Boeing 737.  This editorial, first published on March 15, explores the possibility that problems with the 737 Max could lead the airline to contemplate changing its historic and highly successful business model.

As transportation officials investigate what went wrong on two Boeing 737 Max 8 airliners that crashed, a key question is coming up that could greatly affect passenger safety as well as the business model that has been the secret of success for Southwest Airlines.

“My concern is this is essentially a different airplane than all the earlier versions of the 737,” Rep. Peter DeFazio, D-Oregon, chairman of the House Transportation and Infrastructure Committee, said to Jefferson Public Radio in Oregon. “I want to know how it was that this plane got certified without requiring pilot retraining.”

This is more than an esoteric question.  The answer could have a significant impact on key decisions for airline executives in terms of training, which models to stock their fleets with and which routes will ultimately prove profitable.

The key question here is whether the most popular airplane in the world, the 737, has evolved to the point that pilots need different training and certification depending on which model they fly. And if so, can Southwest Airlines, which famously only has one pilot group, all certified to fly the same airplane model, operate the 737 Max if regulators classify it differently?

We don’t yet know why the Federal Aviation Administration didn’t require such certification to begin with. And it should be said that in the end, that might be the right call.

What we do know is that some pilots have complained to federal regulators about inadequate training on the new model. An investigation by DMN reporters Cary Aspinwall, Ariana Georgi and Dom DiFurio found five complaints in a federal database where pilots can voluntarily report problems. One captain called the flight manual “inadequate and almost criminally insufficient.”

That was before the Ethiopian Airlines crash of a 737 Max 8 earlier this month that killed 157 people and the October crash of the same model flown by Lion Air, killing 189 people. The FAA has grounded the planes pending an investigation.

After the October crash in Indonesia, Boeing promised a software upgrade to address the issue, but that hasn’t yet been rolled out. According to The New York Times, the instruction given to 737 pilots at Southwest and American Airlines on flying the new Max 8 consisted largely of training videos. Both airlines told The Timesthey will install simulators for more intense training.

The success of Southwest and the 737 are entwined. Southwest is the largest and most important customer of the 737 model and the launch customer of the 737 Max.

Part of Southwest’s successful business model is to fly only one airplane model, so that all pilots, flight attendants and airport employees can work any flight. This maximizes efficiency and allows Southwest to turn its planes around quickly so that it can squeeze in more flights throughout the day. Further, passengers know what to expect when they board. This helps speed boarding with an open seating concept.

The Max amps up the Southwest model by extending the range the airline can fly its planes and by boosting efficiency. In its announcement of Southwest’s order of the new Max 7, Boeing said the plane is “part of Southwest’s ongoing effort to improve fuel efficiency and profitability.” Southwest has grounded its 34 737 Max 8 airplanes, which the airline said represented less than 5 percent of daily flights.

Southwest planned to use the 737 Max on its new route to Hawaii. If, however, the Max requires special pilot certification, Southwest may have to rethink some of its decisions. For example, will Southwest have to ensure that all of its pilots are certified to fly the Max as well as other 737s in order to maintain its pool of pilots who can fly any plane in the fleet? If the airline opts not to put the Max back into service, will it be able to maintain its projected profitability for its Hawaii route?

Southwest declined to answer our questions and has referred journalists to an online statement.

The route is an example of how airplane technology drives the aviation industry, and why Southwest historically has worked closely to advise Boeing on upgrades that would be most helpful. Only a few years ago, the idea of Southwest flying across an ocean was a dream, because the 737 was not certified for that type of flight. Now, Boeing is producing 737s that can handle long overseas flights.

Of course, Boeing sells other airliners that make such flights. Fort Worth’s American, for example, uses the 777 to fly to Hawaii and beyond. And, of course, Southwest flies to other exciting destinations such as Cancun, Orlando and Amarillo — and will remain a strong competitor in the skies regardless.