China grounds 737 Max 8 after two crashes of brand-new airliner

Boeing has a gigantic problem on its hands with the second crash of its newest model of the Boeing 737, the Max 8.  Bloomberg reports:

Pressure on Boeing Co. escalated after China grounded all flights of the U.S. planemaker's newest 737 jet, following the second deadly crash of the best-selling narrow-body in five months.  The shares fell in early U.S. trading.

In pre-opening trading, as of this hour (8:05 A.M. EDT), Boeing's stock — a component of the Dow Jones Industrial Average — is down almost 10%:

Source: Market Watch.

According to Bloomberg, China accounts for 20% of sales and orders for the Max 8, a re-engined version of an airliner whose debut was more than 50 years ago.  The 737 family of airliners is locked into competition with the Airbus family of models based on the A320 design, which debuted 35 years ago.  In recent years, Airbus has been getting more orders than Boeing in that family of airliners, with stretch versions, including long-range variants capable of flying from the U.S. to Europe with a low cost per passenger mile, grabbing market share.  Meanwhile, Boeing is dominating the market for wide-body airliners, with the 777 and 787 families outselling Airbus's competitors.

China's grounding may have motivations beyond mere passenger safety, for China has a competitor for both families that is being produced and is planned to enter service in 2021: The Comac (Commercial Aircraft Manufacturer of China) C919.

Photo credit: Comac.

With a huge and rapidly growing domestic airline industry, China has a built in market large enough to sustain an economic level of production.  The problem with introducing new, sophisticated airliners is not simply producing a quality product, but also supporting it worldwide, so airlines are not stuck with airplanes delayed while waiting for parts and service.  Implicit recognition of this issue is why a very large Chinese airline, China Eastern, has announced that it will operate the C919s that it has ordered in a separate subsidiary.  CCAOnline, auto-translated from Chinese, writes:

The development of the domestic large-scale passenger aircraft C919 is accelerating. This year, all six flight test aircraft will be put into airworthiness for test flight. As the world's first user of the C919, China Eastern Airlines is preparing to set up a special airline to operate domestic airliners. Liu Shaoyong, member of the National Committee of the Chinese People's Political Consultative Conference and chairman of China Eastern Airlines Group, submitted a proposal at the two sessions, calling on the state to support the domestic airliner in a multi-pronged manner. ...

Liu Shaoyong, member of the National Committee of the Chinese People's Political Consultative Conference and chairman of China Eastern Airlines, revealed that in order to operate the domestic passenger aircraft, China Eastern Airlines is planning to set up a new airline before the end of this year: "The ARJ21 is one of the aircraft it owns, and it will have other aircraft. In the future, it will definitely form a cluster. In the future, with the increase of production capacity, there may be a large number. Specializing in domestic aircraft, its maintenance, use, efficiency, and all aspects, ultimately serve the improvement of its products."

When a new model is put into the market, it will inevitably encounter various faults and problems.  After a period of running in, the reliability will be significantly improved.  Liu Shaoyong suggested that the state's support for domestic passenger aircraft, in addition to the R&D and manufacturing links, should be more considering the use of links to encourage airlines to actively purchase: "For example, tax rebates, such as the allocation of airline resources.  The provision of better take-off and landing moments, in this respect, the state should provide some help to the operators, so that they can better operate the aircraft, constantly discover problems and improve quality."

There is far too little information available, and I have inadequate expertise to evaluate it, in order to know whether or not a grounding is advisable.  The Lockheed Electra and DC-10 models both were grounded when unexplained crashes occurred.  But such a measure is incredibly expensive and disruptive for airlines and their passengers, and it taints the reputation of the manufacturers.

 Boeing's principal law firm is Perkins Coie, the same firm that laundered the money used by Democrats and Hillary's campaign to commission Fusion GPS to produce the infamous dossier that became the principal basis for commissioning the Mueller special counsel investigation.  Keep that in mind as the FAA evaluates whether or not to ground the 737 Max 8.