Boeing door blowout crisis hitting suppliers, airlines and passengers
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[July 17, 2024] By
Rajesh Kumar Singh and Allison Lampert
(Reuters) - After a door panel on an Alaska Airlines-operated Boeing 737
MAX 9 jet blew off midair in January, Anneke Palmerton learned the
carrier had canceled her flight to Orlando as well.
It did not surprise her as Alaska had decided to ground its fleet of MAX
9 aircraft after the Jan. 5 accident. Little did she know the incident
would snowball, impacting air service in her city of Bellingham,
Washington and upending her winter plans to fly Southwest Airlines.
The door blowout happened aboard only one flight. But fallout from the
ensuing safety crisis has inflated costs for those reliant on Boeing.
Interviews with airline executives, union leaders, pilots, suppliers,
passengers and government officials, show how the incident is rippling
through the trillion-dollar global aviation industry.
Boeing's resulting slump in MAX deliveries has hit earnings at airlines
like Southwest and some suppliers who planned to equip new planes. It
has inconvenienced and stranded passengers as airlines fly fewer routes,
and has led to a slowdown in pilot hiring, interviews show.
"We thought...there would be a little bit of bumps," said Palmerton, a
notary and marriage officiant in Bellingham. "Never in a million years
(did we think) it would lead to Southwest," Palmerton said about the
airline's decision to cut service to her local airport.
Boeing is the largest U.S. exporter and employs nearly 150,000 people
domestically. It supports millions more through a supply chain that
includes thousands of businesses big and small around the world.
Economist Joseph Brusuelas estimates it cumulatively contributes $1
trillion a year to the U.S. economy and supports over 5 million jobs.
Boeing referred to executive comments made earlier that described the
situation as difficult, but noted company efforts to improve quality are
paying off with improved factory operations. Boeing expects to get back
to a MAX production rate of 38 per month in the back half of the year.
SAFETY OVER SPEED
Under pressure from regulators, Boeing has pledged to prioritize safety
over speed, which has slowed down its jet production. It delivered 175
jets in the first half of 2024, down 34% from a year ago and 46% fewer
than its European rival Airbus handed over to customers.
Ramp-up delays have some suppliers waiting to benefit from their
investments. Montreal-area component supplier Meloche Group invested
C$10 million ($7.34 million) this year to support higher demand,
including that of the LEAP engines that power MAX planes.
But GE Aerospace and its partner France's Safran have previously said
they are slowing down LEAP production this year, citing Boeing's crisis.
Meloche now expects to miss its C$150 million revenue target this year
by 5%, although CEO Hugue Meloche said sales should rise 25% in 2025.
The Jan. 5 incident adds headaches for airlines already battling engine
delays on some Airbus A320 jets and industry-wide supply chain
bottlenecks.
Airlines prepare months in advance before putting a new aircraft in
service. They hire and train pilots, and plan their network, incurring
significant preparation and infrastructure costs. The aircraft delivery
delays mean they can't recover those costs.
HIT TO AIRLINES
While the full financial impact of Boeing's crisis is difficult to
quantify, it is taking a toll on airline earnings and jobs.
U.S. budget carrier Allegiant, a Boeing customer, has said that delays
in aircraft deliveries are costing it about $30 million a year.
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![](../images/071724PIX/busine89.jpg)
The fuselage plug area of Alaska Airlines Flight 1282 Boeing 737-9
MAX, which was forced to make an emergency landing with a gap in the
fuselage, is seen during its investigation by the National
Transportation Safety Board (NTSB) in Portland, Oregon, U.S. January
7, 2024. NTSB/Handout via REUTERS/File Photo
![](http://archives.lincolndailynews.com/2024/Jul/17/images/ads/current/debbiesfloral_lda_052824.png)
United Airlines, another customer, has slashed its hiring plans for
the year by almost 30%, citing fewer aircraft deliveries. Rival
American Airlines has also dialed down its hiring plans.
"We have seen some Boeing delivery delays," American's CFO Devon May
told Reuters in April. "So, we're probably not going to be hiring as
many people as we would have expected back in January."
The situation is more dire at Southwest - which operates an
all-Boeing fleet and is now facing the prospect of a proxy fight, in
part due to jet delivery delays.
The company had been hiring staff on an assumption it would receive
85 jets this year, but it now expects only 20 planes.
A lack of aircraft has hit its revenue and worsened cost pressures
as the carrier spends millions of dollars to keep flying older
planes. It is also estimated to have left the airline with about 800
excess pilots.
COST CUTS
With its earnings under pressure, Southwest has decided to
concentrate on more profitable markets and exit Bellingham and three
other airports.
It has already stopped hiring pilots and suspended training for new
hires and drawn up plans to offer its pilots reduced hours and
effectively lower pay.
That's a dramatic reversal in fortune for its pilots, who barely six
months back were so much in demand at rival carriers that the
company was struggling to stabilize the attrition rate.
In Bellingham, Southwest accounts for about 40% of passenger
traffic. Its arrival in late 2021 helped the small city airport
compete as a lower-fare alternative to Canada's Vancouver
International Airport, which had almost 25 million arriving and
departing passengers last year. Travelers from Canada accounted for
over half of Bellingham's estimated passenger traffic of over
630,000 last year.
City officials see an economic impact once Southwest stops operating
in the city in August. "It'd definitely be felt in our communities,"
said Kip Turner, Director of Aviation at Bellingham International
Airport.
ENSURE HIGHEST QUALITY
Since the Jan. 5 incident, Boeing has abruptly announced sweeping
management changes that included the departure of its CEO Dave
Calhoun at the end of the year.
The planemaker has increased inspections at its own and suppliers'
facilities, expanded training for new hires, and instructed managers
to spend more time on the factory floor.
Industry executives say while they are encouraged by Boeing's action
plan, they need results.
"We are wanting to ensure that they produce the highest quality
aircraft, that we can confidently fly safely every single day," said
Alaska Airlines CFO Shane Tackett.
($1 = 1.3632 Canadian dollars)
(Reporting by Rajesh Kumar Singh in Chicago and Allison Lampert in
Montreal; Additional reporting by Lisa Barrington in Seoul, Tim
Hepher in Paris, Anandita Mehrotra in Bengaluru; Editing by Anna
Driver)
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