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THE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & LifestyleTHE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & Lifestyle

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Boeing’s latest MAX problem creates more headache for airlines

The fuselage plug area of Alaska Airlines Flight 1282 Boeing 737-9 MAX, which was forced to make an emergency landing with a gap in the fuselage, is seen during its investigation by the National Transportation Safety Board (NTSB) in Portland, Oregon, U.S. January 7, 2024. NTSB/Handout via REUTERS. File Photo
The fuselage plug area of Alaska Airlines Flight 1282 Boeing 737-9 MAX, which was forced to make an ... The fuselage plug area of Alaska Airlines Flight 1282 Boeing 737-9 MAX, which was forced to make an emergency landing with a gap in the fuselage, is seen during its investigation by the National Transportation Safety Board (NTSB) in Portland, Oregon, U.S. January 7, 2024. NTSB/Handout via REUTERS. File Photo
The fuselage plug area of Alaska Airlines Flight 1282 Boeing 737-9 MAX, which was forced to make an emergency landing with a gap in the fuselage, is seen during its investigation by the National Transportation Safety Board (NTSB) in Portland, Oregon, U.S. January 7, 2024. NTSB/Handout via REUTERS. File Photo
The fuselage plug area of Alaska Airlines Flight 1282 Boeing 737-9 MAX, which was forced to make an ... The fuselage plug area of Alaska Airlines Flight 1282 Boeing 737-9 MAX, which was forced to make an emergency landing with a gap in the fuselage, is seen during its investigation by the National Transportation Safety Board (NTSB) in Portland, Oregon, U.S. January 7, 2024. NTSB/Handout via REUTERS. File Photo

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According to analysts and industry executives, airlines’ dissatisfaction with Boeing’s (BA.N) inability to control a string of safety and supply issues has been reignited by a cabin rupture at 16,000 feet and the grounding of over 170 of the company’s aircraft.

United Airlines (UAL.O) and Alaska Airlines (ALK.N), which ran the domestic U.S. flight on Friday, account for 70% of the MAX 9 fleet and have canceled hundreds of flights. Additionally, the return to service of some of the 12 planes may be delayed, which might impact both airlines’ revenues since provisional examinations reveal loose bolts in those aircraft.

Some have already lowered analysts’ first-quarter profit projections for both airlines. But the length of time the planes are grounded determines how big of an impact they will have. On Tuesday, Boeing CEO Dave Calhoun regretted his errors and informed employees that he and several customers had been “shaken to the bone.” He remarked that Boeing needs to work hard to gain their trust.

“We will be under siege in the next couple of weeks,” threatened Calhoun, according to others who were aware of his comments.

Executives claim that, in addition to the media, investigative laboratories, and congressional corridors, some of the biggest airlines in the world are also feeling the siege in their boardrooms. Additionally, given the competitive market for new aircraft and the lengthy lead times that cause costs to rise to keep up with inflation, this might pressure manufacturers to provide deeper discounts to attract new customers.

“Enough is enough,” stated Dennis Tajer, a representative of the pilots union of American Airlines (AAL.O.). “There’s a deeper systemic problem at Boeing.”

According to sources with knowledge of the situation, United is furious with a supplier with corporate origins after being forced to stop 79 aircraft for which it had sold tickets. United chose not to respond. Boeing cited Calhoun’s remarks from Tuesday, saying he was confident that customers would again exhibit their trust in the company, but Boeing would need to prove it.

Long before the so-called door plug of a 737 MAX 9 airplane fell out during the Alaska Airlines flight last Friday, industry dissatisfaction with the planemaker had been rising.

Due to Boeing’s delayed aircraft deliveries, airlines are finding it more challenging to meet demand. But it is not the only one having trouble with supplies. Despite missing goals twice in 2022, Airbus raced to a better-than-expected finish in the previous year. A lack of personnel and parts constrains the industry’s supply chains.

Last year, Robert Isom, the CEO of American Airlines, openly urged Boeing’s senior management group to “get their act together.”

Industry insiders indicated that while several airlines have considered going directly to the Boeing board or launching a collaborative industry-wide effort, they have not taken any concrete action as of yet. Due to delivery delays, one of Boeing’s most devoted clients, Southwest Airlines (LUV.N.), had to scale down its growth ambitions last year. If the most recent accident delays the more minor MAX 7 certification, plans may need to be adjusted once more. Southwest was compelled to switch some MAX 7 orders to the bigger MAX 8 model because of the certification delay.

“EGGS WITHIN A BASKET”

Although Southwest has referred to Boeing as a “great partner,” a senior pilot representative stated that the airline must seek elsewhere to lower its business risk. With its smaller A220, Airbus has been courting the airline for a long time.

Tom Nekouei, vice president of Southwest’s pilot union, stated, “Boeing has proven what happens if you put all your eggs in one basket.” Following the 2018 and 2019 accidents of the more widely available MAX 8, which claimed 346 lives, Boeing and the MAX have come under increased scrutiny. Global groundings ensued for 20 months.

The MAX has had several difficulties since going back into operation, such as missing or loose hardware, holes that were not drilled correctly, and brackets that were not mounted correctly. Similarly, delivery of Boeing’s bigger 787 was halted last year due to a fuselage problem.

Authorities in the industry claim that delays have complicated schedule planning. “Airlines desire assurance,” stated an unnamed official.

However, airlines find themselves in difficulty as demand surges again after the epidemic. Through 2030, Airbus’s (AIR.PA) order book is fully booked. Boeing revealed its third-best yearly aircraft sales this week as airlines compete for capacity. According to reports, Indian carrier Akasa has been fine-tuning an order for 150 MAX aircraft.

In the long run, airlines desire competition because there are now just two vendors in the market. When Boeing was reeling from the broader MAX groundings in 2019, Willie Walsh, the then-head of British Airways parent IAG, shocked the world’s largest aviation show by placing an order for 200 MAX in Paris.

Even though the order was eventually reduced to 50, the powerful airline executive—who currently leads the trade group IATA—signals that airlines value having a selection of suppliers. Nonetheless, observers noted that patience is running thin. According to Addison Schonland, a partner at AirInsight, the best scenario for commercial aviation is a robust and secure duopoly. Schonland stated, “Every MAX event hurts that stability.”


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