LDN - Business

US airlines warn of more Boeing delivery delays due to safety crisis

[March 13, 2024] By Abhijith Ganapavaram, Rajesh Kumar Singh and David Shepardson

(Reuters) -U.S. air carriers warned on Tuesday that their plans to increase capacity were in doubt due to more jet delivery delays from Boeing, as the hit to the airline industry from the planemaker's safety crisis worsens.

The airline industry has cut expectations for deliveries this year due to Boeing's problems, complicating efforts to meet record travel demand.

Boeing has been under heavy regulatory scrutiny following a harrowing Jan. 5 Alaska Airlines mid-air panel blowout that led to probes into the company's safety and quality standards in its production process.

"Boeing deliveries are going to be way behind this year," United Airlines CEO Scott Kirby said at a conference adding that it was "impossible to say when MAX 10 is going to get certified."

United's shares closed 1.7% lower, while Southwest Airlines shares plunged nearly 15% after it cut its Boeing delivery forecast for the year. Boeing shares closed 4.3% lower, having fallen 29% since the start of the year.

The National Transportation Safety Board said on Tuesday that it would hold a public investigative hearing into the Alaska Airlines incident on Aug. 6-7.

NTSB Chair Jennifer Homendy told Reuters last week the hearing would include testimony from employees at Boeing and fuselage manufacturer Spirit AeroSystems and others like Alaska Airlines.

The carrier confirmed a New York Times report on Tuesday that the MAX 9 involved in the incident had been scheduled for maintenance later on Jan. 5 after pressurization warning lights had come on during three prior flights, leading it to refrain from long trips over water on the aircraft.

"It was not deferred or overdue maintenance. It was simply scheduled for the 5th," Alaska Airlines said.

FLEET PLANS

After the Alaska Airlines incident, the Federal Aviation Administration curbed Boeing's plans to expand 737 production, and the certification of the MAX 7 and 10 models has been further delayed by design changes.

Earlier this year, United said it was going to build a fleet plan excluding the MAX 10, the largest model.

Rival Southwest, the biggest customer for the smaller MAX 7, said on Tuesday it expects 42% fewer MAX deliveries this year from Boeing than previously estimated, and that will likely result in a cut in its 2024 capacity.

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A Southwest commercial airliner takes off from Las Vegas International Airport in Las Vegas, Nevada, U.S., February 8, 2024. REUTERS/Mike Blake/File Photo

It is the second time Southwest cut its delivery forecast this year.

Boeing has advised Southwest to expect 46 jets in 2024, all of which will be the MAX 8 variant, down from the previous expectation of 79 jets, which included the MAX 7 version, the airline said in a filing on Tuesday.

The deliveries will not include MAX 7, which is delayed and still waiting for a FAA certification. Southwest had previously expected 21 MAX 7 jets this year.

Southwest CEO Bob Jordan said he "would not be surprised" if the latest forecast changed again, even as the company highlighted the need to reduce capacity and "re-optimize schedules" for the second half of 2024, which it expects to result in a full-year capacity cut by one full point.

United has approached Airbus about buying more A321neo jets to fill the potential void left by delays for the MAX 10, expected to be certified after the MAX 7, Kirby said.

If the price of A321neo does not work for the carrier, it will rely more on MAX 9 that has 179 seats, and would be ready to convert its orders back to MAX 10 once the jet that has 185 seats in its current configuration gets certified, he said.

Heavy backlogs make it hard for airlines to shift orders to Airbus, the only other large commercial aircraft manufacturer globally.

Alaska Airlines also said its 2024 capacity plans were still in flux due to the Boeing crisis.

The airline does not expect to get all of the 47 planned aircraft deliveries from Boeing over the next two years, CEO Ben Minicucci said.

Boeing said on Tuesday it is adding weekly compliance checks for every 737 work area and additional audits of equipment to reduce quality problems.

"We will not hesitate in stopping a production line or keeping an airplane in position," Boeing Commercial Airplanes CEO Stan Deal said in a memo to employees.

Boeing said it had delivered 27 airplanes in February, down one unit from the same month a year earlier.

(Reporting by Abhijith Ganapavaram and Shivansh Tiwary in Bengaluru, Rajesh Kumar Singh in Chicago and David Shepardson in Washington; additional reporting by Allison Lampert in Montreal; Editing by David Gaffen, Shinjini Ganguli and Jamie Freed)

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