Contracts will need to be reset, timelines moved and significantly smaller deliveries acknowledged as Boeing 737 MAX prepares for reemergence after an almost two-year-long grounding, airlines say.
“We totally plan on taking those aircraft,” American Airlines Chief Financial Officer Derek Kerr said in a conference call on July 23, 2020, discussing financial results of the company and outlining plans to supplement the fleet with Boeing’s troubled child. One hundred of 737 MAX planes are on order by American, but the deliveries stopped with the worldwide grounding in March 2019.
Now the largest US carrier has reported quarterly net losses of almost $2.5 billion, and the demand for air travel is expected to take years to recover. Therefore, according to Mr. Kerr, the timeline of the order is a subject to discussion, as the firm will not take delivery of any unfinanced aircraft.
Another US carrier, Southwest Airlines (LUV), is going to rethink its orders in the aftermath of almost $1 billion quarterly loss. The Boeing order will have to be “completely reset” Southwest CEO Gary Kelly admitted to Reuters, and added that they will probably not need forty-eight 737 MAXes agreed upon for delivery in 2021.
One of Boeing suppliers, Spirit Aerosystems, is bracing for significant reduction in 737 orders and asks its lenders to account for that in the terms of its debt, CNBC reported on July 23, 2020, citing a source in the company. According to the insider information, Spirit, which manufactures fuselages for 737 MAX, forecasts its deliveries this year to be just around 70, instead of previously expected 200. Deliveries in 2021 are also expected to be halved.
All these forecasts are based on the expectation that Boeing 737 MAX will be cleared for ungrounding no earlier than October 2020, which would set its first flights in at least mid-December, according to Southwest Airlines (LUV). A lot of processes are still to be completed before the Federal Aviation Administration (FAA) gives the green light to fly the aircraft, causing delays despite the fact that fixes to its initial problems were certified in July 2020.
Boeing 737 MAX, manufacturer’s latest narrow body aircraft and one of its bestsellers, was grounded after two fatal crashes that caused 346 casualties in total and plunged the largest US aerospace company into a yet-unseen whirlpool of delays and recalls.