In a recent article, we had articulated the effect of the current aviation cataclysm on Airbus and Boeing, and things seem to be getting worse for the already struggling Boeing! As per recent reports, United Airlines has cancelled more than half of their 737 MAX aircraft orders, reducing their MAX order to mere 40 more aircraft by end of 2021.
United Airlines shall accept 16 737 MAX aircraft in 2020, with more 24 bound to join their fleet in 2021. This move is a result of the global aviation demand being cut down by around 90%, due to the COVID-19 pandemic. With substantially decreased passenger loads and minuscule reservations for future flights, most of the airlines have parked a multitude of their aircraft to cope with the situation – lesser aircraft in operation mean decreased costs, and more savings in the current afflicting times. Another way to cut down the expenditures is to retire the aircraft that are old, inefficient and in decrepit condition, following what Qantas and KLM did with 747s, and Lufthansa with their quad-engine jets. Perhaps, the most sensible decision that most airlines would follow shall be to avoid infusion of any new aircraft in their fleet, thereby, saving them millions that would otherwise be spent in procuring these expensive machines!
Alongside United, many more airlines have cancelled a substantial number of the 737 MAX orders in 2020 – Brazilian carrier ‘GOL’ canceled orders for 34 aircraft last month, USA’s Southwest Airlines — the largest 737 operator in the world — has delayed the deliveries of an estimated 75 MAX aircraft, and the Irish leasing company, Avolon, has cancelled 75 MAX orders. According to reports, a total of 150 737 MAX orders have been cancelled in March 2020 alone.
Post the cancellations in March, Boeing shares have tumbled down, now trading at less than fifty percent of their value since the start of the year.
The current crisis has forced Boeing and Airbus to cut production substantially, in the face of financial troubles resulting from plunging demand and logistical difficulties in delivering the aircraft. These issues alongside the fact that the 737 MAX has been grounded for over one year, and now their increasing cancellations have indeed put Boeing in a strenuous position. Single-aisle aircraft were responsible for about 65% profits for Airbus and Boeing during 2010-2019. Thus, the diminishing orders for the 737 MAX is indeed like cutting short Boeing’s oxygen supply!
Even if Boeing manages to get the MAX in air as soon as possible, for how long will the effect of this pandemic linger on Boeing’s future orders? Having rejected government support, with the 737 MAX still on ground, and cancellations pouring in, how much more can Boeing really take? What do you think about the 737 MAX debacle in the current challenging times? Let us know in the comments!