U.S. airlines warn of more Boeing delivery delays due to safety crisis

By Abhijith Ganapavaram and Rajesh Kumar Singh

(Reuters) – U.S. carriers warned on Tuesday that their plans to increase capacity were in doubt due to jet delivery delays from Boeing, as the hit to the airline industry from the planemaker’s safety crisis worsens.

The airline industry has cut expectations for deliveries this year due to Boeing’s problems, complicating their efforts to meet record travel demand.

Boeing has been under heavy regulatory scrutiny following a harrowing Jan. 5 midair panel blowout incident that led to probes into the company’s safety and quality standards in its production process.

“Boeing deliveries are going to be way behind this year,” United Airlines CEO Scott Kirby said at a conference, organized by J.P. Morgan, a week after the carrier said it was pausing pilot hiring for two months.

Rival Southwest Airlines said on Tuesday it expects 42% less MAX deliveries this year from Boeing than previously estimated, and that will likely result in a cut in its 2024 capacity.

It is the second time Southwest has cut its delivery forecast this year after first flagging delays in January, which sent its shares down 13% in early trading.

The first delay was announced after the U.S. Federal Aviation Administration (FAA) barred Boeing from raising its 737 MAX production without specifying a timeline on lifting that restriction.

Airline executives have publicly expressed support for Boeing, which is facing heightened regulatory and legislative scrutiny, but have privately been frustrated with the problems that have started to affect airliners’ ability to meet customer demand.

Heavy backlogs make it hard for airlines to shift orders to rival Airbus, the only other large commercial aircraft manufacturer globally.

Boeing has advised Southwest to expect 46 jets in 2024, all of which will be the MAX 8 variant, down from the previous expectation of 79 jets, which included the smaller MAX 7 variant, the airline said in a filing on Tuesday.

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The largest U.S. domestic carrier said it does not expect deliveries of the MAX 7 jet, which is mired in certification delays, in 2024. Because of its need to reduce capacity and “re-optimize schedules” for the second half of 2024, Southwest will have to cut full-year capacity plans by one full point, the airline said.

Alaska Air Group, the operator of the 737 MAX 9 jet that experienced a mid-air cabin panel blowout, also said its 2024 capacity plans were still in flux due to the Boeing crisis. Its shares were up 1%.

United shares lost about 3.5%.

Boeing shares were down 4% after the New York Times reported that the recent FAA audit of its 737 MAX production found numerous problems.

United has approached Airbus about buying more A321neo jets to fill a potential void left by delays in the delivery of Boeing’s larger 737 MAX 10, which is expected to be certified after the MAX 7.

“It is impossible to say when the MAX 10 is going to get certified,” United’s Kirby said on Tuesday. He added that the airline will not overpay for Airbus planes.

(Reporting by Abhijith Ganapavaram in Bengaluru and and Rajesh Kumar Singh in Chicago; additional reporting by Shivansh Tiwary in Bengaluru; Editing by David Gaffen, Anil D’Silva, Arun Koyyur and Shinjini Ganguli)