Transport

Boeing, the domino effect of accidents: fewer flights, fuller and more expensive planes

Boeing, struggling with inspections and investigations, is uncertain about the timing of deliveries. Companies look for difficult alternatives: Airbus has a full order book and also some problems

17 March 2024

Boeing 737 Max, storia di un aereo maledetto

4' min read

Key points

A whole sector in trouble
The impact on passengers: heavy increases
Missed orders and long delays

4' min read

The disastrous start to 2024 for Boeing is impacting airlines and their passengers due to delays in the US aircraft manufacturer's production; delays that are fuelling the already existing shortage of medium- to short-haul aircraft that form the backbone of commercial air travel.

United Airlines Holdings, Southwest Airlines, and Ryanair, Bloomberg Agency explains in an analysis, are among the companies rushing to respond to Boeing's reduced deliveries, while the latter focuses on resolving the quality shortcomings that emerged from the 5 January incident on an Alaska Airlines flight.

An entire industry in trouble

With the summer travel season imminent, airlines say they are busy reducing schedules and looking for alternatives to the 737s they have already ordered. Even Boeing seems uncertain as to when the planes will be ready while an army of US inspectors scours its factories, meaning the company cannot make any firm predictions as to when things might be back to normal.

"All they say is what you would expect: 'We are working as hard as we can. We're sorry for the inconvenience. We're doing the best we can,'" John Plueger, CEO of aircraft leasing company Air Lease, told Bloomberg. 'As soon as we have certainty, we will inform you,' Plueger reports further.

Airbus, Boeing's main competitor, has a virtually exhausted order book until the end of this decade, so there is no alternative for airlines to turn to. Like Boeing, the European manufacturer has struggled to restore production to pre-pandemic levels. An engine wear problem grounded hundreds of Airbus aircraft, further damaging aircraft availability at a time when airline demand is particularly high.

Boeing stated that it is 'solely focused on implementing changes to strengthen quality throughout our production system and taking the time to deliver high quality aircraft that meet all regulatory requirements. We continue to stay in close contact with our valued customers on these issues and our actions to address them'.

Usa, ritrovato il portellone perso in volo dal Boeing 737 Max 9 di Alaska Airlines

The impact on passengers: heavy increases

"This is not just this year's problem. This is a multi-year issue,' Steven Townend, head of aircraft charterer BOC Aviation, said in a Bloomberg television interview on 15 March. "It will take several years to really recover."

For passengers, this will mean fewer flight options and potentially higher prices on at least some popular routes. The shortcomings mainly affect single-aisle workhorses such as the Boeing 737 and Airbus A320 family, which fly short and medium distances and make up the majority of the global fleet. As a result, domestic and regional flights are more affected than longer distance travel.

Airlines have not added seats between New York and Los Angeles fast enough to meet demand, according to Amex Global Business Travel. The agency expects business class ticket prices to increase by up to 8.5 per cent on the busy route during the summer season.

Between Seattle and San Francisco, prices in both business and economy class are expected to rise by up to 18% in the first half of the year, according to Amex GBT.

Airline ticket prices in the US spiked in 2022 and early 2023 when travellers returned to the skies en masse, but then fell for most of last year due to falling domestic demand.

The latest US government data show that ticket prices rose 3.6 per cent between January and February, the largest monthly increase since May 2022.

"You will see fewer flights and fuller planes" during the summer, Air Lease's Plueger said. "It will probably mean higher fares."

Missed orders and long delays

There is good news for the flying public. Hopper, which monitors price trends, does not expect summer ticket prices to rise significantly beyond where they were in 2019, the last year of normal travel before the pandemic.

Pandemic-related production delays at Airbus and Boeing have deprived airlines of up to 4,000 new aircraft over the past three to four years, BOC Aviation's Townend estimates.

Boeing's recent problems are further widening the gap between supply and demand. United now expects to receive less than a third of the 157 Max aircraft it has contracted this year, according to its regulatory announcements. The airline is close to an agreement to replace some of these with at least three dozen Airbus A321s obtained from aircraft leasers, Bloomberg reported.

Southwest, which operates an all-Boeing fleet, scaled back its growth for this year last week and halted most hiring in response to the slowdown in deliveries. The airline said it does not expect to receive any of the 737 Max 7s not yet certified this year, and that deliveries of other Boeing models will stop at only 46 units, down from the 79 previously planned. "As you would expect, the whole situation is very fluid," said CEO Bob Jordan.

In Europe, Ryanair said it will be missing 17 Boeing planes it expected by the end of June. This will result in a leaner summer schedule and 5 million fewer passengers this year. The carrier plans to increase prices by up to 10 per cent and reduce services from Dublin, Milan and Warsaw.

Alaska Air Group Inc. also said its plans are in flux with uncertain Boeing deliveries.

Boeing is not the only reason why flights are crowded. Airlines such as Lufthansa and Wizz Air have been forced to scale back growth plans due to necessary repairs on the Pratt & Whitney turbine engines that lie under many A320 wings.

Boeing's outlook for the rest of 2024 is difficult to predict. Regulators are limiting 737 production to 38 per month for the time being, but Boeing has delivered a total of only 42 of its 737s in the first two months of 2024. Company officials said they expect to approach the target in the second half of the year.

This month, Boeing managed to secure a major order from American Airlines Group for the largest variant of the 737, the Max 10. The model is important for Boeing because it is selling well and is the only competitor to Airbus' A321 that has gained popularity because it can handle more passengers on longer routes. American's CFO, Devon May, said the order was a 'vote of confidence' in Boeing.