Global Airlines Reassessing Their Exposure to Boeing

by Warren Seah

Global airlines, including even the loyal customer Southwest Airlines, are reevaluating their risk exposure to Boeing. In a recent adjustment to its 10-K annual report, Southwest Airlines highlighted the industry’s concerns.

Dependency on Boeing

In terms of operational risks, Southwest stated its reliance on Boeing as the sole manufacturer of its aircraft, a sentiment expressed in last year’s report as well. However, a notable change was made in the wording of this year’s filing.

The revised statement acknowledges that if the MAX aircraft were to become unavailable for the company’s operations or experience prolonged delivery delays, it could have a significant and adverse impact on the company’s business plans, strategies, and results of operations.

Shifting Focus

This new emphasis on the potential unavailability of the MAX aircraft is noteworthy. In the previous year’s report, Southwest focused primarily on the risk of prolonged delays in the certification of the MAX-7 by the Federal Aviation Administration. As a result, they have also removed the yet-to-be-certified jet from its 2024 capacity plans.

Southwest Airlines and Boeing have not responded to requests for comment at this time.

The Max Aircraft Risk

If the MAX aircraft is unable to fly, it would have a severe impact on Southwest Airlines. The airline currently has 223 MAX 8s out of its 817-strong fleet as of December 31st and has firm orders for 495 more aircraft, consisting of 307 MAX-7s and 188 MAX-8s, scheduled for delivery between 2024 and 2031.

While this risk has always been present, Southwest Airlines perhaps did not feel the need to explicitly state it until recently. The fact that they have now done so highlights how airlines are reevaluating their exposure to Boeing amidst the company’s ongoing challenges.

Investigation into Emergency Door Incident on Alaska Airlines

Alaska Airlines recently faced an alarming incident involving a blown-out emergency-door plug on one of its MAX-9 planes. As a consequence, the Federal Aviation Administration (FAA) grounded the jet for a duration of three weeks. This investigation holds utmost significance, given the potential risk it posed to the safety of passengers.

Delays in Boeing 737 MAX Delivery

In addition to the emergency-door incident, Boeing has encountered new issues related to the fuselages of its 737 MAX aircraft. Consequently, the company has made the decision to postpone the delivery of 50 planes. This step has been taken to ensure that all necessary precautions and improvements are made before the planes are put into use.

Southwest Airlines’ Confidence in Boeing

Southwest Airlines has shown unwavering support for Boeing, eager to collaborate and assist in making the company even better. CEO Bob Jordan expressed his confidence in the MAX 8 model and indicated the company’s enthusiasm for acquiring the MAX 7 model. Their positive outlook showcases a strong partnership between Southwest Airlines and Boeing.

United Airlines Rethinking Plans for Boeing MAX 10

On the other hand, United Airlines has decided to reevaluate its longer-term plans concerning the Boeing MAX 10 aircraft. Although United has not canceled its order for 277 jets, CEO Scott Kirby noted that the MAX-10 has been excluded from their internal plans. This adjustment comes as a result of the MAX-9 grounding, which raised doubts about the MAX 10’s ability to meet their expected schedule.

Emirates Airlines President Raises Concerns

The president of Emirates airline, Tim Clark, recently expressed concerns about Boeing’s standards. In an interview with the Financial Times, Clark described a “progressive decline” and referred to Boeing as being in a “last chance saloon.” These remarks highlight the growing dissatisfaction among industry leaders regarding Boeing’s performance.

Limited Alternatives for Airlines

While concerns may be mounting, the reality is that airlines have limited alternatives to Boeing. With Airbus being the primary competitor, both companies face substantial order backlogs extending over a decade at current production rates. Given these circumstances, airlines may have little choice but to continue relying on Boeing for their aircraft needs.

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