Boeing’s challenges are sending ripples through major U.S. airlines, impacting their operations and plans.
“Airlines are cutting back on flying and tempering plans to hire pilots and flight attendants as they prepare to receive fewer Boeing planes than they had planned at the start of the year.”
Southwest Airlines announced on Tuesday that it would reduce flight capacity and reassess its financial outlook due to lower-than-anticipated deliveries of Boeing aircraft.
Consequently, the airline’s shares plummeted by approximately 15% during afternoon trading, with concerns also raised about weaker leisure travel demand in the early part of the year.
“United Airlines is pausing pilot hiring for two months and exploring options with Boeing rival Airbus to address the shortfall in aircraft. Similarly, Alaska Air indicated that its plans for the year are uncertain due to delays in Boeing deliveries.”
Boeing has implemented production slowdowns for its popular 737 MAX jets amidst heightened scrutiny from regulatory bodies like the Federal Aviation Administration and the Justice Department.
In February, the company shipped 17 narrow-body MAX jets, a decrease from eight fewer than January’s numbers and a significant drop from the figures in November and December.
“The reduced February production output suggests that Boeing is well below its target of producing 38 MAXs per month. This target was set before an incident in January where a door plugs detached midflight, prompting a federal safety investigation.
Subsequent scrutiny from regulators, combined with internal quality control efforts, have hampered production at Boeing’s Renton, Washington factory, which is responsible for manufacturing the planes.”
At the forefront of airline woes in 2024 are Southwest, United, and Alaska, all grappling with disruptions in the delivery schedules of new planes from both Boeing and European competitor Airbus. These setbacks have persistently hindered the growth plans of airlines in recent years.
Boeing took steps on Tuesday to address these issues, announcing measures aimed at enhancing quality control.
These include conducting compliance checks and quality audits at its 737 factory, as well as curtailing a practice known as traveled work, which involves completing manufacturing tasks out of sequence. Workers have raised concerns that this practice increases the risk of production errors.
“We will not hesitate in stopping a production line or keeping an airplane in position,” stated Boeing commercial chief Stan Deal in a memo.
These actions come in response to an FAA production audit and the recent release of findings from an independent panel tasked with reviewing Boeing’s practices following the 2018 and 2019 737 MAX crashes.
In addition to these challenges, a Boeing 787 Dreamliner was involved in a midair incident this week during a flight from Australia to New Zealand, resulting in approximately 50 passengers requiring medical treatment. The cause of the incident remains unclear, and Boeing has pledged to cooperate with the investigation.
Boeing anticipates production to remain below its target of 38 aircraft per month through the first half of the year, according to finance chief Brian West. He emphasized the need to focus on maintaining aircraft in position longer to incorporate lessons learned.
Airlines are adjusting their plans in light of the uncertainty surrounding regulatory approval for certain MAX jet models. Southwest announced it no longer expects to receive the 27 MAX 7 jets it had anticipated for 2024, while United has removed the largest MAX 10 jets from its schedule indefinitely.
United’s CEO, Scott Kirby, acknowledged the necessity of Boeing’s slowdown, even if it means delayed deliveries this year.
“As much as I would like those deliveries, you know, this is not a 12-month issue. This is a two-decade issue,” stated Kirby at an investor conference. “I’d rather Boeing do what they need to do, and I think they are now.”
United is exploring options with Airbus to replace the MAX 10s it will not receive soon, while also urging Boeing to prioritize building more of the smaller MAX 9 jets.
Southwest Airlines, exclusively operating Boeing planes, finds itself particularly vulnerable to the manufacturer’s ongoing challenges. The airline intends to scale back its flight capacity primarily in the latter half of the year.
Plans are underway to slash pilot hiring by over 50% and flight-attendant hiring by more than 60% as part of cost-cutting measures.
Originally anticipating the receipt of 79 MAX planes this year, Southwest now expects only 46. CEO Bob Jordan emphasized the importance of Boeing resolving its underlying issues for the long-term benefit of the industry.
“We all need Boeing to be stronger two years from now, five years from now, 10 years from now. And that takes precedence over delivery delays,” remarked Jordan.
Alaska Airlines reported a profit loss of at least $150 million due to the three-week grounding of Boeing MAX 9 jets following the January incident. However, the carrier has received partial compensation from Boeing.
Irish budget carrier Ryanair announced earlier this month that it will need to reduce its summer flying schedule due to anticipated shortfalls in Boeing airplane deliveries.
Despite these challenges, some airlines remain optimistic about Boeing’s prospects. American Airlines recently placed an order for 85 new Boeing MAX 10 planes, expressing confidence in the manufacturer.
While expecting delivery by 2028, American has negotiated safeguards, including options for additional Airbus planes and the flexibility to switch to a different MAX model if necessary.
