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The Expanding Boeing 737 Fallout.
Is Lincoln, Nebraska An Early Casualty?
Summary: The 737-9 event has sparked a range of FAA and airline responses. One is a material delay in Boeing deliveries at a time USA carriers are depending on them for 3Q schedules. The outcome appears to be already in progress across the industry.
Let’s cut to the chase.
I‘ve been asked for insight from a range of media outlets, from local stations to CNBC Asia, on the Boeing 737-9 situation. The warning is not to assume that the FAA letting -9s back in the skies is a get-out-of-jail-free card for Boeing.
It’s just the start of a set of dynamics that have yet to play out across the aviation industry, affecting air service and the fleet direction of the industry.
Almost completely ignored is that the fallout from the -9 affair and other sideshows in Renton will affect air service levels at communities across the nation. A lot of airliners that UA, AS, WN, AA, G4 were planning on for this summer won’t be there. Market planning departments are in full metal jacket mode to address this.
But it goes beyond truncated airline schedules. The FAA prohibition on Boeing increasing production rates for 737s will have devastating effects on suppliers to Boeing – the contractors building fuel control valves, and landing gear components, even down to lavatory door handles. Constricted production hits them hard.
It’s An Earthquake In The Airframer Business. This is not just about loose bolts on a few airplanes. It’s about a growing cloud that is now materially changing the dynamics of the global airliner production business, and airline fleet decisions.
This latest 737-related incident may very well change the future of Boeing by chasing some entries off of their orderbook and into the open cloak of Airbus. Yes, Airbus right now has a full orderbook into 2030, but you can bet they have the wherewithal to increase production if refugee customers from Boeing come banging at the door.
United apparently is already doing just that.
Deliveries Delayed = Capacity Plans Delayed, Too. The FAA has dictated that Boeing not implement expected increases in production rates, until the causes of the -9 fiasco are determined. That’s a giant monkey wrench tossed into a number of airlines’ schedule planning.
It gets worse. One can take it to ‘Vegas and make book that the certification of the -10 and -7 will also be slowed by even closer FAA scrutiny. That’s even more hits to United, Southwest and Alaska, none of which are probably including the CEO of Boeing on their Christmas card list for 2024.
That means some unavoidable changes in summer schedules at these airlines. Both United and Southwest have made this clear.
Lincoln: The First Victim of The Boeing Drive-By? It’s already hit home. The folks at Lincoln just got word United is dropping IAH flights.
According to media reports, the airport was blindsided. No surprise there. The IAH-LNK flights were by no obvious metric falling short. According to data from Cirium, load factors exceed 80%. Flow traffic and flow yields over IAH are very strong.
The market is obviously producing for United. But still, it was axed. There will be some increases in ORD and DEN flights, but the fact is that LNK will have access to one less connecting hubsite – from the only airline serving the airport.
The timing tells it all. The flights will continue until May – another four months. Like, until United implements its revised summer schedule. A summer schedule with fewer airliners than they originally planned.
In fact, United has announced it is no longer counting on 737-10 deliveries this year. It has 225 on order. Delayed arrivals will likely be experienced with the other thirty or so 737-8s and -9s UA still has on the Boeing order book.
Now Southwest, expecting slower deliveries of the 300 737-7s it has on order, is cutting these out of planned schedules for the rest of 2024. Not inconsequential, as these units were important to WN in fully knitting into its system the 18 airports they unilaterally opened in 2021.
More Air Service Pink Slips Yet To Come? The LNK decision by United may be the start of schedule revisions at not only United and Southwest, but at American (which has another 70 737-8s on the Boeing books that will now probably be late arriving) and also at Alaska.
We can also mention Allegiant, which has over fifty 737-7/8s on order. They are probably not happy campers at the moment, either.
Airlines make hard plans based on promised delivery dates. Now, these flying machines won’t be flying when expected, because of Boeing’s failures. That will have more than a passing effect on the USA air transportation system.
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