Feb. 28, 2022, © Leeham News: The clouds are very dark over Ukraine today. The unprovoked invasion of Ukraine by an international autocratic lying amoral thug is horrible. What the implications are for neighboring European countries, the greater Europe, the US, and the rest of the world won’t be fully understood for months.
But reality is reality, and LNA’s focus on commercial aviation must look at things from this perspective—narrow as it is in the context of human tolls underway in Ukraine now. In the dark cloud of the Ukraine crisis, we must look at what the impacts might be on commercial aviation.
In these very early days, the full impact can only be speculated. But here’s what we know so far, only a week into the invasion.
With the Ukraine invasion underway, might this trigger the Force Majeure clause in airplane contracts? Or if the titanium supply dries up, would this trigger the clause? Force Majeure relates to events outside the control of the OEM.
Boeing has about 110 787s and more than 300 737s in inventory. Boeing no longer has ticketing authority to certify the airplanes for delivery. This is held by the Federal Aviation Administration. Boeing is on the hook for customer compensation due to the MAX regulatory grounding and the inability to deliver 787s. Will the Force Majeure draw a timeline that may be used to halt future compensation claims? The airlines and lessors surely will say the underlying delivery delays mean the clock won’t stop with Ukraine. Boeing’s lawyers probably will take a different view. In this event, what’s not paid in compensation goes to the legal teams, albeit at a lower cost.
Airbus and Embraer have the same clause in their contracts, but their current circumstances don’t remotely match the predicaments Boeing is in.