Mar 12, 2024 - Economy

Boeing's manufacturing problems hit Southwest, United Airlines

Illustration of a dollar sign being formed by jet streams.

Illustration: Maura Losch/Axios

Boeing's troubles are starting to cause some turbulence for major airlines.

Why it matters: Carriers that were depending on new planes from Boeing to meet their growth plans are now scaling back expectations, or scrambling to find other options.

Between the lines: Southwest Airlines on Thursday said it was lowering its 2024 capacity growth projection and "re-optimizing schedules," primarily in the second half of the year, driving its stock down 15% on the day.

  • Southwest — whose entire fleet is composed of Boeing 737s — pinned it on an expectation that the manufacturer will deliver fewer 737 MAX aircraft than it previously expected, including no 737-7 planes this year.

Zoom out: Boeing is facing serious quality questions after an exit door plug blew out mid-flight during an Alaska Airlines trip, triggering inquires that have delayed production.

  • The Federal Aviation Administration said Tuesday that an audit of the 737-9 MAX production line uncovered "non-compliance issues in Boeing's manufacturing process control, parts handling and storage, and product control."

The big picture: Fewer planes could mean less seating capacity and higher maintenance costs for airlines — and thus less revenue and more expenses.

  • With a 1 to 1.5 percentage point reduction in its prior projected capacity growth for 2024, Southwest is responding by implementing cost cuts, CEO Robert Jordan said on a conference call.
  • Those cuts include a halt to hiring for its reservation support team as well as a suspension of pilot hiring classes and flight attendant hiring classes, Jordan said.
  • "We now plan to end the year solidly down in staffing versus 2023 compared to our prior guidance of flat to down," he added.

For Boeing, its issues could mean lost business altogether.

  • Delta CEO Ed Bastian told Bloomberg on Sunday that he now expects it could take as long as three more years for Boeing to deliver its order of 737 Max 10s, and noted that it's been "very pleased" with Airbus's competing single-aisle plane, the A321neo.
  • And United Airlines CEO Scott Kirby told conference goers Tuesday that it has also approached Airbus about buying more A321neo jets as it faces delays with its own Boeing deliveries.
  • Delta's stock is up slightly over the last week, while United fell more than 3% this morning before finishing down 1.7%.

Reality check: Airlines are balancing their near-term needs for aircraft with a longer-term view of the industry.

  • "We all need Boeing to be stronger, two years from now, five years from now, 10 years from now," Southwest's Jordan said. "And that takes precedent over delivery delays."
  • Kirby last month called Boeing not just its most important partner, but "one of the most important companies in the country."
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