On January 5th, a door panel flew off mid flight on an Alaska Airlines Boeing 737 Max 9 jet causing multiple flight cancellations and groundings of Max 9 jets to make sure all planes were in a safe condition to fly. Little could anyone guess that over 6 months later this event has snowballed and is continually impacting businesses around the world and forced Boeing to make changes.
Boeing is one of the largest aerospace and defense companies in the world and is a major player in the commercial airline industry. It is the largest exporter in the United States and employs around 150,000 people domestically. On top of that combined with it’s supply chain Boeing contributes $1 trillion a year to the U.S. economy and supports over 5 million jobs. Since January Boeing has committed to improving quality and factory operations. Boeing let go of its CEO and changed the company policy to increase inspections. This has resulted in a slowdown of production with only 175 jets produced in the 1st half of 2024 which is 34% less than the 1st half of 2023. Boeing aims to get back on track by the end of the year.
Boeing’s slowdown in production and the forced grounding of Max 9 jets have had a huge impact on airlines and Boeings suppliers. Meloche a Canadian company that produces engines for Boeing recently invested $7.34 million to ramp up production to support rising demand has had to cut back and is expected to miss its revenue target by 5%. The biggest losers so far have been carriers. Allegiant, a low-cost airline, is currently losing $30 million a year due to aircraft delays. United Airlines has had to cut back on its hiring plans on will 30% less than it forecasted. A similar impact is happening at American Airlines where its CFO said, “We have seen some Boeing delivery delays, so, we’re probably not going to be hiring as many people as we could have expected back in January.”
Southwest so far has been the biggest loser and its earnings have taken a massive hit. Southwest is only expected to receive 20 of its 85 jets it ordered for this year. This leaves them with an excess of 800 pilots and has forced Southwest to exit four airports. Due to poor performance year to date Elliot, an Activist investor with an 11% stake in Southwest is threatening a proxy war to change Southwest’s leadership.
Alaska Airlines CFO Shane Tackett stated that “We are wanting to ensure that they produce the highest quality aircraft, that we can confidently fly safely every single day.” Ultimately the industry won’t return to normal until Boeing has regained the trust it lost with the incident that happened earlier this year on January 5th.
Comments