Boeing’s troubles are spilling over to its airline customers
After three years of scrambling to hire and train pilots, United Airlines is encouraging its aviators to take unpaid time off next month, the latest example of how woes at Boeing - including delays in aircraft delivery - are rippling through the aviation industry.
Production limits imposed on Boeing after a piece of the wall blew off an Alaska Airlines plane midflight in January are in part responsible for the delays, which are forcing carriers to halt hiring and rethink schedules even as demand for air travel remains robust.
Southwest Airlines, which operates an all-Boeing fleet, had anticipated receiving 58 Boeing 737 Max 8 aircraft but will instead receive 46. Boeing’s continued challenges, Southwest said in a regulatory filing, may require it to reduce the number of seats it offers and rethink its capital spending program, which includes investments in aircraft and technology upgrades.
As a result, Southwest said it would pause hiring, including for pilots and flight attendants, as it revamps its schedule for the second half of the year. The carrier said it will offer updated guidance for 2024 operations during its earnings call this month.
United has also paused pilot hiring for May and June, though it may resume in July.
“As you know, United has hundreds of new planes on order and while we remain on a path to be the fastest growing airline in the industry, we just won’t grow as fast as we thought we would in 2024 due to continued delays at Boeing,” the carrier said in a memo to employees. “For example, we had contractual deliveries for 80 Max 10s this year alone - but those aircraft aren’t even certified yet and it’s impossible to know when they will arrive.”
A note sent by union officials to United pilots last week cited “recent changes to our Boeing deliveries” as a reason for the voluntary time off programs. The airline confirmed the offer saying the voluntary time off programs will be used to reduce excess staffing for the month of May.
At a Bank of America industrials conference last month, Boeing’s chief financial officer, Brian West, acknowledged the impact of the company’s troubles on its customers.
“We put the customers in a tight spot [and] the most important thing we do is communicate with them,” West said. “And they have been supportive of everything we’re trying to do to enhance safety and quality for the industry. We are in regular, very transparent communications and they know precisely where we stand and the progress that we’re making and we, at the same time, have to understand what their needs are as they think about their flight schedules and their passengers.”
The ripple effect of Boeing’s ongoing troubles on some of its largest customers may become clearer this month with several carriers, including Alaska Airlines, scheduled to report earnings. Alaska previously said the grounding of the 737 Max 9 following January’s blowout incident cost it an estimated $150 million.
How Boeing’s woes will impact travelers, however, is yet to be seen.
Aviation analyst Henry Harteveldt said larger carriers with significant numbers of Boeing jets in their fleets plan carefully to ensure they have enough aircraft to meet demand during peak periods. However, possible impacts from the delivery delays could include fewer nonstops flights or less frequent service to some destinations, he said. In the most extreme cases, carriers could halt flights to certain cities.
“It could mean, possibly, more inconvenience to travelers,” Harteveldt said. “Depending on where you live and where you’re going, your options may not be as plentiful.”
Boeing is scrambling to reassure regulators, its customers and the flying public after part of an Alaska Airlines jet blew out in midflight shortly after takeoff from Portland International Airport on Jan. 5 and left a gaping hole in the side of the aircraft. No one was seriously injured in the accident, but subsequent audits and investigations have exposed shortfalls in its manufacturing and quality control programs and made the company the target of late-night comedians and social media memes.
A preliminary report by National Transportation Safety Board investigators found that four bolts designed to hold the portion that blew out of the 737 Max 9 plane - known as a door plug - were missing. But efforts to find out why the bolts were not replaced after being removed during final assembly at Boeing’s Renton, Wash., plant have been stymied because the company said the paperwork does not exist.
A six-week audit by the Federal Aviation Administration identified significant weaknesses in Boeing’s quality control and assurance programs. The agency gave Boeing 90 days - with a deadline in late May - to come up with a plan to address the issues. The FAA also imposed a limit on the number of 737 Max jets Boeing can produce each month until the agency can ensure the company is following its own quality control procedures.
The company also has run into delays as it seeks FAA certification of the 737 Max 10 under a new process in which the regulators are more deeply involved in scrutinizing Boeing. The company is eager to win approval of the Max 10 because it is designed to compete with Airbus’ A321neo jet.
The company is also seeking FAA’s sign-off on its 737 Max 7. In late January - following the Alaska Airlines incident and under pressure from lawmakers - Boeing withdrew its request for an exemption to current safety regulations linked to a de-icing system on several 737 Max models, including the Max 7. An exemption would have helped speed the Max 7′s certification.
Last week, the company announced the departure of its chief executive, David Calhoun, who is stepping down at the end of the year, and the executive who ran its commercial aircraft program, Stan Deal, who is retiring. The chair of the company’s board of directors, Lawrence W. Kellner, who oversaw the establishment of a new board aerospace safety committee following fatal Boeing 737 crashes in 2018 and 2019, also announced he would not seek reelection.
Scott Kirby, chief executive of United Airlines, said at last month’s J.P. Morgan Industrials Conference that he is willing to accept a delay in deliveries if it means Boeing has taken the necessary steps to right itself.
“I am encouraged with the following at Boeing: I think they have accepted that there are larger changes that they need to make,” Kirby said. “I think that means this year deliveries are going to be way behind what they originally forecast and expected and I am glad that is the case.
“As much as I would like those deliveries, this is not a 12 -month issue. This is a two decade issue,” Kirby continued. “And I’d rather Boeing do what they need to do.”
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