United, Southwest shares drop after warning of more Boeing delivery delays ‘way behind this year’
US carriers warned on Tuesday that their plans to increase capacity were in doubt due to 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 their efforts to meet record travel demand.
Boeing has been under heavy regulatory scrutiny following a harrowing Jan. 5 midair panel blowout incident 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 organized by JPMorgan, adding that it was “impossible to say when MAX 10 is going to get certified.”
The carrier’s shares fell 3.3% on Tuesday.
United has approached Airbus about buying more A321neo jets to fill the potential void left by delays in Boeing’s larger 737 MAX 10, expected to be certified after MAX 7.
If the price of A321 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, Kirby said.
Heavy backlogs make it hard for airlines to shift orders to rival Airbus, the only other large commercial aircraft manufacturer globally. Earlier this year, United had said it was going to build a fleet plan excluding MAX 10.
Rival Southwest Airlines said on Tuesday it expects 42% less MAX deliveries this year from Boeing than previously estimated, and that will likely result in a cut in its 2024 capacity.
It is the second time Southwest has cut its delivery forecast this year after first flagging delays in January, which sent its shares down 13%.
The first delay was announced after the Federal Aviation Administration barred Boeing from raising its 737 MAX production without specifying a timeline on lifting that restriction.
Airline executives have publicly expressed support for Boeing, which is facing heightened regulatory and legislative scrutiny, but have privately been frustrated with the problems that have started to affect airliners’ ability to meet customer demand.
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 smaller MAX 7 variant, the airline said in a filing on Tuesday.
The largest US domestic carrier said it does not expect deliveries of the MAX 7 jet, which is mired in certification delays, in 2024.
Southwest CEO Bob Jordan even said he “would not be surprised” if the latest forecast changed again, after 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.
Because of its need to reduce capacity and “re-optimize schedules” for the second half of 2024 Southwest will have to cut full-year capacity plans by one full point, the airline said.
Alaska Air Group, the operator of the 737 MAX 9 jet that experienced a mid-air cabin panel blowout, 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 on Tuesday.
“We are squarely focused on implementing changes to strengthen quality across our production system and taking the necessary time to deliver high quality airplanes that meet all regulatory requirements,” Boeing said in a statement on Tuesday after remarks from US airline chiefs.
“We continue to stay in close contact with our valued customers about these issues and our actions to address them.”
Boeing shares fell 4.6% as the planemaker said it had delivered 27 airplanes in February, down one unit from the same month a year earlier.
