The Grounded Boeing Planes and Potential Loss of Use Claims
April 9th, 2019
Following two major crashes and an apparent link to a faulty navigation system, the Boeing 737 Max 8 and Boeing 737 Max 9 were grounded worldwide. The United States was the last to ground the Boeing jets on March 13, 2019. With over 370 of these planes in operation around the world, this grounding has already resulting in millions of dollars losses to the airline industry.
The recent Boeing airplane crashes have already sparked lawsuits against the company on behalf of the passenger’s heirs and estates. But claims by the victim’s families and representatives are not the only potential litigation Boeing faces over these crashes. Companies effected by the grounding of these massive jets face millions of dollars of lost revenue and/or replacement jet leasing costs due to the disruption of their scheduled flights. These airplane loss of use costs could be the subject of a entirely separate claims brought against Boeing.
The Recent Boeing Airplane Crash History
The first Boeing crash–Indonesia’s Lion Air crash–occurred on October, 29th, 2018 killing 189 people. The most recent crash, the–Ethiopian Airlines crash-occurred on March 10, 2019, killing 157 people. Both of these Boeing crashes have gained significant media attention. They both involved the Boeing 737 Max passenger planes, and; both were outside the United States. As a result of similarities in these two crashes, the 737 Max 8’s and 9’s were grounded.
Airlines Losing Income Due to Airplane Grounding
The economic impact of the current grounding continues to be substantial. There are currently over 370 Boeing 737 Max planes owned by companies that have been grounded and there are orders for over 4600 more. Among the largest fleets are:
- Southwest Airlines (34)
- American Airlines (25)
- Air Canada (24), and;
- China Southern (24).
But there are numerous smaller airlines operating fewer 737 Max planes that depend upon these to meet their flight plans. A single 737 can easily make 3-4 flights per day, carrying 138-230 passengers. This could result in significant income to the air lines lost and significant delays and inconvenience to customers.
How To Calculate Loss of Use of an Airplane
There are a couple ways to calculate the loss of use of a Boeing plane due to grounding. A review of publications online indicates that estimates for the lease of a comparable airplane run $150,000-350,000.00 per month. Thus, one easy way is to take the reasonable cost of leasing a comparable replacement and multiply it by the time the jet spends grounded.
In the event that the airline cannot afford to lease a replacement and has to cancel flights, another means of calculating the loss of use of an airplane is to total up the estimates revenues and deduct the anticipated costs of the flights that were already scheduled by looking at the particular flight’s earnings history. Developing a pattern of earnings is a common way to estimate losses that are somewhat speculative in nature. Over the past say 1-year history of a regularly scheduled flight, what was the average profit per flight? Then, you multiply that number times the number of flights cancelled.
The latter method of calculating loss of use is a common way to estimate lost earnings for self-employed people with regular contracts. Obviously, its accuracy and reliability depend largely upon how regular the flight schedule for the airline is. Planes that do not make regularly scheduled flights would have a harder time establishing a historical baseline as well as a future flight cancellation loss. Thus, they might be better off using the reasonable cost of a replacement plane.
Product Liability vs Breach of Contract Claims
If a faulty navigation system proves to be the cause of Boeing’s crashes, there are two potential causes of action that may be brought. Anytime someone sells a product, there are certain warranties that typically flow from the deal. One of these is a warranty of fitness for particular purpose. Boeing sold a plane with a certain navigation system for the purpose of flying passengers and/or cargo. Their planes are currently grounded because they are deemed unfit for this particular purpose.
In such case, there may be a choice of causes of action. Product liability law carries similar requirements that a product be fit for its purpose or that the consumer be warned about the defect. If a company is aware or should be aware of a defect in a product, this may lead to liability for damages as well. Under either a product liability claim, or a breach of contract claim, one may seek damages for the losses incurred in the loss of use of the product that was the subject of the sale.
Contract Limitations on Claims
It is yet to be seen how the purchase contract between Boeing and the airlines will come into play. Many contracts contain contractual limitations on a purchaser’s right to bring claims or causes of action. These limitations may influence which cause of action best suits a plaintiff or whether she has any cause of action at all. Contractual limitations in airplane purchase agreements may limit the time, may require specific notice be give, may force mediation or arbitration over litigation or may otherwise alter the purchaser’s right to bring a claim. Thus, anytime a case like this arises, it is important to have an attorney review the specific contract that was involved in the sales transaction to see which causes of action are the best.
Asserting Loss of Use Claims
Loss of use claims may be asserted anytime a vehicle, whether it be a plane, car or truck, is taken out of operation due to someone else’s negligence. At this point, it is still too early to tell what the full loss caused by the Boeing 737 grounding will be. Claims for lost profits due to loss of use can be difficult and complex. Reading and understanding the Boeing sales contract will likely be the key in determining what remedies and options the airline companies have. It would be wise to consult an attorney before attempting to calculate and pursue a loss of use claim on one’s own.
Paul Cannon has practiced personal injury trial law since 1995. He is Board Certified in Personal Injury Trial Law (2005). He has earned recognition as a Super Lawyer by Thompson Reuters in 2017 & 2018, and as a Top 100 Trial Lawyer by the National Trial Lawyers Association in 2017. He is a Shareholder, trial lawyer and online marketing manager at Simmons and Fletcher, P.C. His legal writings have been published by the Texas Bar Journal, Business.com, Lawyer.com HG Legal Resources, Lawfirms.com, and others. He has been asked to give education talks and media interviews on dog bite law.