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Many airlines use 737 Max, raising stakes for Boeing

CBS News logo CBS News 3/12/2019 Rachel Layne
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Boeing shares fell as much as 11 percent after the crash of an Ethiopian Air 737 Max 8.The 737 Max 8 was the same plane that went down in a deadly Lion Air crash last year. Sales of the 737 Max account for roughly a third of Boeing's profit. Boeing expects 737 Max models to make up 90 percent of 737 deliveries in 2019.

Sunday's crash of a Boeing 737 Max 8 passenger jet operated by Ethiopian Airlines is a potentially serious blow to the U.S. aircraft manufacturer, coming only months after a deadly Lion Air accident last fall in Indonesia that involved the same plane model.

Although experts warn that it's too early to know what caused the Ethiopian Airlines crash, both crashes occurred shortly after takeoff, suggesting a possible connection. Other concerns are focusing on new software used by the Max 8 that's designed to automatically adjust a plane's flight angles when they're too steep.

"Reports are early, but the similarities between the Lion Air and (now) Ethiopian 737 Max plane crashes are hard to ignore," UBS analyst Myles Walton told clients in a note after a decline in Boeing shares following the latest incident.

Here are some reasons why the plane is so important to Boeing, and to the broader airline industry:

It's the best-selling jet in history

The Boeing 737 is the best-selling aircraft in history — the Max is its newest version, with more fuel-efficient engines. It is also Boeing's most important aircraft type, generating almost one-third of the airline maker's operating profit, according to Bloomberg.

Aircraft manufacturers need that cash not only to satisfy investors and boost profit, but also to fund the development of newer models. Aircraft can be in service for decades, so any glitches or major problems can have ramifications for years to come.

It's a growing part of Boeing sales

Boeing delivered 806 aircraft last year, 256 of them Max models. Boeing executives said in a recent earnings call that about 90 percent of the 737 models delivered in 2019 are expected to be Max versions.

Boeing is a top defense contractor, but its commercial airplane division is its biggest business, making up nearly $61 billion of its $101 billion in total revenue last year. The 737 Max models represent about two-thirds of Boeing's future deliveries and account for roughly 40 percent of its profit.

Boeing shares fell as much as 11 percent in morning trade before ending the day down just over 5 percent.

It's important to other airlines and engine makers

Airlines like Southwest, with a fleet that's nearly all some version of 737 models, are drawn to the Max because it's drastically more efficient than existing models and shaves off crucial costs, like fuel. Southwest noted Monday that customers are asking if their flight will be on a 737 Max 8, while saying in a tweet that it remains "confident in the Safety of our fleet."

As of Dec. 31, Southwest had 750 Boeing 737 models in its fleet, including 31 Max 8s. American had 24 Max 8s. United said it has 14 Max 9 planes, which is a larger version of the same aircraft (Boeing provides a full list of orders and deliveries on its website.)

Southwest said is keeping in close contact with Boeing as information about the Ethiopia Air crash comes in.

The 737 Max's engines are made by CFM, a joint venture of General Electric and french company Safran. A version of the engine is also an option on A320neo models.

It's the only engine type used on 737 Max models. CFM says the engine offers a 15 percent improvement on fuel consumption, one of an airline's biggest cost concerns.

80 airlines use the 737 Max

The Max comes in four models — 7 through 10, but the 8 is the most widely sold. As of Dec. 31, Boeing had orders for more than 5,000 Max model planes from roughly 80 airlines. The 737 model is considered the backbone for many airline fleets. An older version  of the model, the 737-800, has almost as many orders at 4.991. With 350 Max models delivered as of January, the model competes with Airbus's newest version of its A320 family, the A320neo.

The first commercial flight of the 737 Max 8 was May 22, 2017, for Malindo Air, operating from Kuala Lumpur to Singapore. Southwest Airlines took its first delivery for the 737 Max 8 on Aug. 29, 2017, and debuted the plane Oct. 1, 2017.

The Max is a central part of Boeing's strategy to compete with European rival Airbus, whose A320neo model of airliners compete with the Max models.

Each plane costs tens of millions

List price for the 737 Max 8, a narrowbody, or single-aisle, aircraft, is more than $120 million, according to Boeing's website, though airlines often negotiate substantial discounts.

Narrowbody planes list for less than widebody, longer-distance planes. For instance, 787 models list for roughly $300 million depending on the version. The version of the iconic 747 that is still for sale lists for more than $400 million.

How do I know if I'm flying on a 737 Max 8?

Most airlines inform passengers of the type of aircraft when booking a flight online or over the phone. Websites like SeatGuru can show the type of plane model for a specific flight. According to The Points Guy, American Airlines' Max 8 planes have row-numbering systems that differ from traditional 737s.Brian Pascus contributed to this report.

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