Among ongoing safety and security issues, the world’s foremost aircraft manufacturer is causing concern for some of the biggest airlines in the U.S.
Boeing In Trouble Again?
It’s blow after blow for Boeing, as the multi-national aircraft manufacturer faces a slate of safety concerns, security issues, compensation payouts, and pending lawsuits this year.
Now, they have reportedly cost United Airlines as much as $200 million in losses.
$200 Million Hit for United
The U.S. airline announced on Tuesday that it took a $200 million hit to estimated earnings in the first quarter of 2024.
Forced Grounding Cost Millions
This was due to the forced grounding of a fleet of Boeing 737 MAX after a mid-air blowout on Alaska Airlines called the model’s safety into question.
The Alaska Airlines Incident
In January, an Alaska Airlines flight to California saw a door plug blown off the side of a 737 MAX 9, forcing an emergency landing.
The incident made global headlines and called into question the safety of Boeing aircraft.
79 Planes Grounded
United were required to ground 79 737 MAX 9 models for three weeks while safety checks and investigations were carried out.
Thousands of Flights Canceled
The grounding led to thousands of canceled flights, heavily impacting sales. The airline also had to ask pilots to take unpaid leave as there were not enough flights running to accommodate their staff.
A Fleet of MAX 9’s
United had the largest number of MAX 9 models of any airline besides Alaska Airlines. They have officially attributed a $200 million loss in earnings to the grounded fleet.
No Mention of Compensation
The airline asserted that they “would have reported a quarterly profit” if not for the grounding but made no mention of whether Boeing would be expected to reimburse them.
Another Financial Hit to Fraught Boeing
If they do seek compensation, it will be another considerable hit to Boeing’s accounts. Earlier this month, the company paid $160 million in “initial compensation” to Alaska Airlines.
Alaska Airlines Compensated
The large payout was also due to the grounding of MAX 9 models and “customer considerations” following negative headlines and safety concerns after the blowout incident.
Fewer Losses Than Predicted
It is still unclear whether Boeing will be expected to compensate United and other U.S. airlines. The loss was reportedly less than predicted by Wall Street, and United’s share value increased by 5% in the wake of the announcement.
A String of Issues
Like Alaska, United has also experienced publicity struggles over safety inquiries. However, these are far from the only Boeing-related problems that United is battling.
Delivery Delays Expected
The airline recently told investors that it is expecting significant delays in Boeing deliveries. A section of its orders from Boeing has had their delivery dates moved from 2025 to 2027.
One-Third of Expected Deliveries
In 2024, they predicted the delivery of just 66 Boeing aircraft, compared to the 183 aircraft they had predicted in December last year.
Adjusting Their Plans
In a company statement, CEO Scott Kirby announced that United had “adjusted our fleet plan to better reflect the reality of what the manufacturers are able to deliver.”
Notifying Investors
Earlier in the year, they also told investors that “due to the delay of the certification of the 737 MAX 10 aircraft and continued supply chain issues, the Company currently expects a reduction in deliveries from Boeing during the next couple of years.”
737 MAX 10 Release Pushed Back
The 737 MAX 10 model, which was expected to enter the market this year, has been pushed back to next year at the earliest, as its certification by the Federal Aviation Administration will be delayed over safety concerns.
Potentially Devastating Effects for United
Manufacturing and shipping delays could be devastating for the airline, further impacting earnings and operations.
Moving to the Competition?
Even if Boeing is not expected to compensate for United’s $200 million deficit, the airline has still garnered further losses as it plans to lease 35 new Airbus A321neos from Boeing’s largest global competitor.
Going from 9s to 10s
It will also convert a number of its MAX 10 orders to MAX 9’s, which are expected to arrive between 2025 and 2027.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
