737 Max: how Brazil became the only country to demand specific training

March 30, 2019 • Reading Time: 6 minutes

Hello! In this week’s issue: 737 Max: how Brazil became the only country to demand specific aircraft training. Brazil’s economy problem is education. How Brazilian markets performed. And the most important facts of the week.

The week in review

  • Oil & gas. Petrobras will change its structure, giving more power to its board of directors and CEO — especially in decisions to sell off assets. CEO Roberto Castello Branco will personally oversee the divestments program, and only the board will be able to veto a decision to sell a subsidiary; shareholders (including the Brazilian government) will no longer have a say. A vote on the changes is scheduled for April 25. 

  • Economy. Brazil’s unemployment rate has risen for the 2nd straight month, to 12.4% in the three months through February. Adding up unemployed people, discouraged workers (those not actively seeking employment) and people working less than they would like, the number of underemployed people in Brazil has reached 27.9m people — the highest number ever recorded.

  • Politics. After a week and a half of trading insults, President Bolsonaro and House Speaker Rodrigo Maia have reportedly buried the hatchet. But Congress still has the government on the ropes, with the possibility of passing laws that would blow up the budget — and could even lead to a shutdown — if the president continues to undermine political parties. To avoid further tension, Economy Minister Paulo Guedes has taken over the role of negotiating the pension reform in Congress.

  • Corruption. After spending 4 days in prison, former President Michel Temer was released on Monday. Days later, however, he was indicted in two separate corruption cases: Mr. Temer is accused of (1) pocketing a BRL 500,000 bribe; (2) leading a corruption ring that embezzled money from state-owned companies for decades. He denies any wrongdoing.

  • Dictatorship. March 31 marks the 55th anniversary of the 1964 military coup. President Bolsonaro, an enthusiast of the dictatorship, ordered army barracks to celebrate the date. After the backlash, Mr. Bolsonaro said he wanted the Armed Forces to “rethink what happened, evaluating the good and the bad.” A federal court issued an injunction forbidding military regiments to celebrate the date — which was suspended on Saturday morning.

  • Israel. President Bolsonaro flies to Israel on Saturday. He had promised to move the Brazilian embassy from Tel-Aviv to Jerusalem, but has suffered pressure from meat producers who fear a backlash from Arab-majority countries. The government is mulling over an alternative: placing a business office in Jerusalem, but leaving the embassy where it is.

Brazil’s economy’s problem is education

The recent crises within the Ministry of Education showed that the government has no clear plan to fix the country’s educational woes. And there are many. Brazilians remain in school, on average, for less than 8 years — and while the country is making progress, it is hardly at a fast enough pace.

Brazil’s 1988-born generation reached (by 2013) an average of 10.1 years in school. Chile had that level 24 years ago, being reached by the generation born in 1964. Brazil’s education system is an entire generation behind Chile’s.

Markets

The pension reform’s path in Congress is proving to be a rocky one. Days like Wednesday, when the São Paulo stock market index crashed more than 3%, could happen again, depending on news from Brasília. To cover their bases, many investors are diversifying their portfolio. Investment bank BTG Pactual recommended buying Suzano shares (SUZB3) ashedge, as its revenues are obtained in USD. But, if the optimism about the pension reform gets a boost, local assets may perform better. One trader quoted Usiminas as a stock to watch: it rose 3.7% on Friday.

Natália Scalzaretto, TBR markets reporter

737 Max: how Brazil became the only country to demand specific training

After examining black box data from an Ethiopian Airlines flight that crashed on March 10, investigators believe the cause was a malfunctioning sensor that led an automated anti-stall flight-control feature, called MCAS, to take over, removing control from the pilots. MCAS automatically points the plane’s nose down to stop it stalling, which is typically an important safety feature, but when it glitches, it can have deadly results. The system is believed to be the cause of another crash in Indonesia less than five months earlier.

Boeing is under immense pressure, especially as pilots transitioning to the 737 Max aircraft from older models were given a short, self-administered online course that made no mention of the new MCAS system. As a matter of fact, pilots for Brazilian carrier Gol were the only ones in the world to have formal training on the new features of the aircraft. Let us explain.

60 new features 

Usually, when certifying foreign-produced planes, agencies tend to follow the recommendations made by regulators of the country of origin. In the case of the 737 Max, the U.S. Federal Aviation Administration delegated significant responsibility and oversight to Boeing. Pilots weren’t given new specific training, “due to the similarities between the new model and the previous generation of the series.”

Three officials of Brazil’s National Civil Aviation Agency, however, found over 60 differences between the models and concluded that pilots should, in fact, undergo specific training for the 737 Max. They wanted to impose a 4-hour course using a flight simulator — but there wasn’t a proper software for that at the time, in late 2017. The decision was then made to hold a 3-hour computer-based training course and an online exam.

The MCAS was only one of the 60 new features presented to pilots — and didn’t get special attention. Still, Gol pilots were the only ones in the world to have any formal knowledge about the system. Pilots told The Washington Post they were left in the dark on Boeing’s new plane software.

Since the Ethiopian Airlines crash, 393 Boeing 737 Max aircraft have been grounded worldwide. Europe’s biggest tour companies expect an immediate hit of at least USD 225m.

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