Cayman Airways is feeling the financial impact of grounding its Boeing 737 Max 8 jets amid growing uncertainty over if and when the planes will be back in service.
The airline was applauded for being among the first in the world to ground the jets after a deadly crash in Ethiopia in March sparked safety concerns about the model.
But with regulators now estimating that the aircraft will not be cleared to fly until the end of the year at the earliest, the economic effect is starting to take its toll.
CEO Fabian Whorms said CAL and the Cayman Islands government are “currently actively engaged with all concerned parties, in seeking an amicable resolution for the hardships being experienced by the airline”. He said the negotiations were commercially sensitive and could not be discussed in detail at this point.
Several airlines are seeking compensation from Boeing and the Wall Street Journal reported last month that the manufacturer will set aside around $5 billion to compensate airlines that have suffered because of the prolonged grounding of the planes.
Whorms said the loss of the jets had forced Cayman Airways to reduce flights and limit the number of seats available on certain flights. He said the new nonstop route to Denver had been able to run with a significantly reduced passenger load. Nonetheless, he said, the route had been a success, transporting 5,500 passengers since inception.
Instead of running its international schedule with four jets – two new 160-seat Max 8s and two older 122-seat 737‑300 jets – the airline has been operating with three 737‑300s.
“The schedule and flight modifications made by the airline, along with the occasional use of substitute-service aircraft, have allowed it to generally cope with the scheduled flying with minimized impact to the travelling public,” said Whorms.
“However, with the airline and the country now experiencing very strong demand for airlift, the limited capacity has restricted the airline’s ability to maximize its revenues.”
He said extra services had to be added in some cases to meet demand. Despite the best efforts of the airline, he said there would inevitably be a financial impact.
“Operating a fleet of Boeing 737‑300 aircraft, carrying 24% less passengers and burning 20% more fuel, there will certainly be an impact on the airline’s bottom line. In addition to the higher operating costs associated with our 737‑300 aircraft, the cost of using sub-service when necessary, has also been significant,” he added.
The longer-term fleet transition plan, which was slated to involve retiring the older 737‑300s and moving to a fleet of four Max 8 jets, has also been put on pause.
Whorms said, “While the aircraft manufacturer anticipates that the Max aircraft will be ungrounded in the last quarter of 2019, the duration of the grounding is still largely unknown and there remains great uncertainty as to when Boeing 737‑8 Max operations will resume for Cayman Airways. We are therefore looking at several possible contingency plans, should the aircraft not return to service in time for our winter schedule.”
Despite those concerns, he said Cayman Airways continued to look at possible new destinations and expects the Max 8s to be back in service in time for any new routes to be announced. Tourism Minister Moses Kirkconnell has previously suggested the Max 8 jets could help open up new gateways on the west coast, by enabling nonstop service to cities like San Francisco or Vancouver. Kirkconnell commended Cayman Airways for its management of the situation and said passenger volumes were actually up 8% overall. He said the Denver route had performed well, despite the challenges.
“Even now, while the Max are grounded, new routes continue to be explored and existing service evaluated for possible improvements,” Kirkconnell said.
The Denver route was the first gateway made possible by the Max 8 aircraft, which are more fuel efficient and have a longer range than the older jets.
Whorms said the grounding of the jets just 10 days after the launch had put the success of the route in jeopardy. He said the airline had secured substitute service for the early sold-out flights and then restricted seat sales to 90 passengers per flight to allow the Boeing 737‑300 jets to make the route without a fuel stop. He said this reduced capacity and increased fuel cost had challenged the financial performance of the route.
Even so, the airline has transported 5,500 passengers on the route, more than doubling visitation from that region to Cayman since May.
“While there is no doubt that the new Boeing 737‑8 Max aircraft would have allowed for greater success of the Denver route, all things considered, Denver has performed better than expected,” he said.
He also addressed “inaccurate comments” on social media implying the 737‑300 aircraft are cutting it close on fuel for the Denver route and that passengers should expect fuel stops on all flights.
“This is unfortunately misleading, as all flight plans are developed and planned based on predicted temperatures, weather, passenger load, and various other conditions, with proper safety margins being our first priority,” he said.
“Having operated dozens of flights over the past four months, the airline has only had to make en route fuel stops on two occasions when the take-off temperature in Denver warranted a reduced payload, resulting in a fuel uplift which was less than that required for a nonstop flight to Grand Cayman. The airline does not however anticipate any further fuel stops for the remainder of the year.”