Bing Air Inc. (Bing Air) makes small jets used by smaller airlines and companies with small airplane fleets. In
2018, Bing released a new version of its most popular aircraft, the Jet5.0. The Jet5.0 was similar to earlier versions of the jet, but the engines had been modified to become more fuel efficient. The engine modifications resulted changed some aspects of the design of the plane. The software systems used in the plane were also updated.
Before anyone could use the new airplanes, Bing Air had to obtain regulatory approval for its upgraded Jet5.0. The Canadian administrative agency that regulates all aspects of air travel received and considered Bing's application for approval of the new Jet5.0 before the jet was sold to and used by Bing's customers. The agency's enabling statute required that all new airplanes flown in Canada be approved by the agency. The statute also permitted the agency to impose whatever restrictions and conditions it deemed appropriate in its approvals of new airplanes. Initially, the agency approved Jet5.0 on the condition that it only be flown by pilots only after they received two days of additional training in a simulator related to the handling of the airplane's new design as well as its software changes. Bing Air challenged the agency's conditional approval and threatened to seek review of the decision. After some discussions, the agency amended its approval and only required pilots to view a 90 minute training video before permitting the Jet5.0 to be used.
In its marketing to clients, Bing Air emphasized how similar the Jet5.0 was to the Jet4.0. This was important to customers as pilots would not have to undergo significant additional training, which could add a material cost.
Sales of the Jet5.0 were brisk and created substantial revenue for Bing Air. Jets involve complex manufacturing processes and therefore the contracts for purchase and sale of the jets often involved delivery dates that were months and even years away. Bing Air sold jets to Canadian and international customers.
In 2018 and early 2019, two Jet5.0's crashed in Alberta. The cause of the 2018 crash, which resulted in 20 fatalities, was unclear. Early investigations into the 2019 crash, which resulted in 18 fatalities, strongly suggest that the new software systems used in the Jet5.0 could generate confusing information that is displayed to pilots. The design changes also made the jet harder to fly in difficult weather conditions. Both crashes occurred during challenging weather conditions. Two pilot unions have publicly stated that the Jet5.0 is harder to fly than then Jet4.0, which is surprising given the very limited training associated with the new jet.
Two different companies owned the jets that crashed. The owner of the jet that crashed in 2018 was an oil and gas company that used the plan as part of its corporate fleet. The owner of the jet that crashed in 2019 was a small airline that services northern Canadian communities. Immediately after the crash, the airline's bookings dropped. The small airline anticipates a major reduction in revenue in 2019 and beyond and feels its reputation has been damaged.
The two crashes have received significant media attention. Bing's credit rating has dropped as a result of this. Almost all customers who had expressed preliminary interest in placing orders for the Jet5.0 have disappeared. However, the administrative agency's approval remains in place. Jet5.0 jets are still approved to fly with the original conditions.
As part of its response to these events, Bing Air has slowed production of new Jet5.0 aircraft and is reworking its software systems. The slowdown means that delivery dates are not being (and will not be) met. In some cases, purchasers have had wait months beyond the contractually agreed delivery dates for their aircraft to be delivered.
Bing Air had a large contract with an American purchaser, SunnyAir. In its contract with Bing Air, which was signed in 2018, SunnyAir agreed to buy 15 Jet5.0's. Ten were already delivered by the time of the second crash. One was due to be delivered in February, 2019, but was delayed. Now SunnyAir wants to get out of its contract in relation to all remaining five aircraft not yet delivered.
In 2018, Bing Air had also participated in a solicitation process. The Canadian military was seeking to buy 20 jets over a 7-year period and issued a request for tenders. Bing Air's proposal was fully compliant with the RFT issued by the Canadian military. Concerning terms and condition as well as price, Bing Air's proposal provided the best value compared to other bids. The Canadian military had internally decided to proceed with Bing Air as the successful bidder before the 2018 crash, but made no public announcements to that effect. Now it is considering proceeding with the second place bidder and has changed its bid evaluation criteria to justify selecting the other company.
For the purposes of this scenario, assume that Bing Air is headquartered in Calgary and that it sells its aircraft pursuant to contracts for the sale of goods, subject to all statutes and common law rules applicable thereto. No additional research regarding the regulation of the aviation industry in Canada is needed. Conduct FIlAC (Facts, issues, Legal, Analysis, conclusion) analysis of this case and list 2 legal scenarios identified within this case?
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