Boeing Door Blowout Crisis Hitting Suppliers, Airlines and Passengers
Editor
17 July 2024 22:59 WIB
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 (AIR.PA) 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 (GE.N) and its partner France's Safran (SAF.PA) 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 (AIR.PA) 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 (ALGT.O), a Boeing customer, has said that delays in aircraft deliveries are costing it about $30 million a year.
United Airlines (UAL.O), another customer, has slashed its hiring plans for the year by almost 30%, citing fewer aircraft deliveries. Rival American Airlines (AAL.O) 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 the 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.
