The grounding of Boeing 737 Max planes following fatal crashes in Ethiopia and Indonesia will prompt airline risk managers to review their operations and put business continuity plans into action, according to senior risk professionals.
On Thursday 14 March, the US government followed the European Union, United Kingdom, Canada, New Zealand, China, Australia, India, Egypt, Thailand, and Vietnam in grounding the aircraft. The countries have also banned the planes from operating in local airspace.
The Boeing 737 Max was blamed for the fatal crash in Ethiopia on March 10 which killed 157 people. The disaster came just five months after another 737 Max 8 crash in Indonesia which killed 189 passengers.
The accidents are still under investigation, but pilots on board both planes reported problems after takeoff. It is believed a sensor on the aircraft triggered an automated system which caused the planes to nosedive. There is mounting information linking the two crashes, according to America’s Federal Aviation Administration.
Boeing says it has “full confidence” in the safety of the aircraft, but the US decision adds significant weight to the temporary ban. The grounding has forced flight cancellations and diversions, impacting airlines and passengers across the globe.
The grounding is expected to continue for several weeks as authorities assess whether manufacturing or operational airline errors were to blame. Risk managers will review the situation carefully, according to senior consultants.
Suchitra Narayanan, a risk consultant with years of experience in the aviation sector, said airlines would asses their fleet, and consider whether mechanical faults or human error caused the crashes.
“A lot of airlines will be looking into where the liability lies and how and where to draw that line. This will involve careful analysis to understand exactly what transpired and how the catastrophe was caused,” she said.
Narayanan added: “If airlines are Boeing-heavy, they might looking at their strategy for future purchases. Whether passengers will be swayed by operators that predominantly fly Boeing planes, remains to be seen.”
Narayanan said airline risk managers would look at their safety data and procedures. “It might be they [an airline] have had a few near misses, but all it takes is for one of those near misses to become a reality. While this event is catastrophic, risk managers will have an opportunity to look at the data and understand what needs to be done to ensure such an event does not happen.”
She said it would be difficult for airlines to handle the crisis, despite preparation for worst-case scenarios. “Most airlines will have a simulation for something like this, and you can have the best-laid plans, but in reality, it is very difficult to deal with the human emotion.”
Narayanan said airlines affected by the 737 grounding would put their business interruption plans into work. “Business continuity plans come in, whether it is a technical issue or catastrophe, airlines should have a continuity plan to mobilise. There may be reciprocal agreements with other airlines etc. These things would have been thought about.”
She added the 737 grounding would be a notable insurance event. “It is unprecedented and will be a big event for insurers. It will be interesting to see how they respond to a crisis like this.”
Narayanan believes Boeing will be focused on reputation management. “The worst case scenario has happened. It will be about trying to contain the reputational damage. They [Boeing] will want to figure out exactly what went wrong, whether it was a mechanical product defect or a pilot or operator error.”
Martin Baghdadi, an Australia-based director at Control Risks, admits it is difficult for risk managers to prepare for an event of this magnitude. “Once again, despite having rehearsed every possible crisis situation, I would be surprised if Boeing saw this one coming.”
However, Baghdadi said risk managers could learn some lessons from the crisis. “Companies should ensure their crisis management teams are prepared for specific events. The key message for risk managers is not to war game hundreds of different crisis situations, but instead, ensure their crisis management team is defined and is well versed in first response protocols.”
“Risks managers need to also understand that number and countries choosing to suspend Boeing 737 Max aircraft operation is still very fluid, and they should anticipate travel disruption. There are a lot of moving parts here for risk managers to consider,” Baghdadi added.