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More bad news for Boeing as major customers pull MAX orders

written by Hannah Dowling | October 26, 2020
737 MAX Family in flight (Boeing)

Boeing is facing even more woes, as two major airline customers, American Airlines and Southwest Airlines, have both deferred and cancelled upcoming orders on its embattled 737 MAX jet.

American has announced the deferral of 18 MAX jets that were scheduled for delivery in 2021 and 2022. The airline has tentatively said it will now take the aircraft over 2023 and 2024.

Chief financial officer for American Derek Kerr said there would need to be a “substantial improvement in the demand environment” to justify taking delivery of any of the jets prior to 2023.

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Southwest Airlines, the largest MAX customer, has also said it may further restructure its order, after recently agreeing with Boeing to take delivery of no more than 48 aircraft through to December 2021.

Southwest CEO Gary Kelly said both the delivery schedule and the price of the airline’s order are to be negotiated.

“In this world that we’re living in, we’re talking to them about everything. I’m not happy that the MAX has been delayed for now getting close to two years and we still don’t know when we’ll have it in service,” Kelly said. 

“We’re looking at the pricing in a whole new environment and obviously we need certainty around the MAX, period.”

American has stuck by its intentions to reintroduce the MAX to commercial service in December on its Miami to New York route, pending the imminent regulatory approval for the jet to return to the skies.

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However, Southwest does not share the same optimism. 

In light of the logistical challenges involved with re-introducing planes that have been grounded for over 18 months, Southwest doesn’t anticipate it will return its MAX jets to service until at least the second quarter of 2021.

In another blow to Boeing, Kelly has also recently been quoted saying the airline may reconsider its historical position as being an all-Boeing carrier, and a future order of the smaller Airbus A220 model may be in the works.

When asked about the matter, Kelly said, “The only thing I would willingly admit is if there were ever a scenario to make a change in aircraft type it would be now. We’re not desperate to grow the airline and we may not be for a long time.”

Both Boeing and European rival Airbus have suffered an unprecedented number of order deferrals and cancellations in light of the COVID-19 pandemic, and subsequent plummet in demand for international travel.

However, the 737 MAX’s prolonged grounding, following two fatal crashes of the aircraft that killed 187 people in total, have made Boeing that much more vulnerable, according to Bloomberg.

Over 1,000 737 MAX aircraft alone have been removed from Boeing’s backlog so far this year, due to outright cancellations or delayed deliveries that are unlikely to be filled.

Currently, there are 3,357 MAX jets on order, however future cancellations could see this number drop.

According to Bloomberg, Boeing’s debt load has jumped to US$61 billion thanks to its pandemic fundraising efforts, up from US$28.5 billion at the start of the year.

The 737 MAX is due to return to commercial service within weeks, with both the US Federal Aviation Administration and the European Union Aviation Safety Agency stating regulatory approvals are due to be confirmed in November.

2 Comments

  • Steve A

    says:

    Not surprised that Boeing is suffering now. It has had some pretty crappy management in recent times.
    Instead of focusing on its businesses and designing world beating aircraft, its business has been turned into buying back its own shares.
    That has made it a darling of Wall Street. With grossly inflated share prices making it having record performance.
    But, back on the farm, so to speak, in order to have more cash for share buy backs, a 1960’s vintage aircraft was dolled up into yet another iteration of the B737.
    That saved Boeing mega bucks in capital costs and R&D.
    Boeing is not alone in the Wall street share buy back sagas. American companies do this all the time and convince shareholders that it’s a return to shareholders.
    Some, like American Airlines, even spend cash they don’t have to do this. They spent nearly $7 billion US more on share buy backs, than their free cashflow. Crazy stuff eh?
    And who are at the forefront of US companies holding their hands out for US taxpayer’s money?
    Boeing wants $60 billion, and heaps of other US airlines are up there too wanting billions as well.
    And many Australian companies are guilty of management laziness too.
    Qantas has spent more than $3 billion on “returning money to shareholders ” by buying back shares.
    I think that most long-term QF shareholders would prefer a more stable and generous dividend payment, instead of having to wait 7 years like in the past for Mr Joyce to throw them a few scraps.
    Or for their profits to be redirected towards developing the airline, or even, dare I say it, buying some more new aircraft to give their passengers a better service.
    If they had bought new aircraft, of course they would be probably in storage now. But at least they would have been available for collateral.
    Who could have guessed that COVID-19 would be with us? Nobody is blaming AJ for COVID-19, but the airline should have been in better shape, for this or any other eventuality.
    Qantas shouldn’t be gaining domestic market share because of reduced competition, but because it is made into a great airline again.
    This won’t happen with the current top management in place, or the current Board in place. They are supposed to be a supervisory team, looking after shareholder’s interests, but up until now they just rubber stamp AJ’s decisions.
    Make the change now QF Board. Do your job finally.

  • Peter Brown

    says:

    Fewer Maxs = Less deaths

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