Boeing's 737 MAX Crisis Ripple Effects Disrupt Airlines, Suppliers
The midair incident in January involving a door panel blowing off an Alaska Air Group Inc (NYSE:ALK) operated Boeing Co. (NYSE:BA) 737 MAX 9 jet, leading the carrier to ground its MAX 9 fleet has had a domino effect on all aspects of aviation industry.
This single incident has led to inflating costs for those dependent on Boeing and straining airlines’ operations, reported Reuters.
The resulting slowdown in Boeing’s MAX deliveries has hurt earnings for airlines like Southwest Airlines Co (NYSE:LUV) and various suppliers, while also causing inconvenience and stranding passengers.
Also Read: Judge Allots Time For Boeing 737 MAX Crash Victims’ Relatives To Object Plea Deal: Report
Southwest Airlines and other carriers have had to fly fewer routes and face increased costs. With a significant impact on its earnings, Southwest has decided to focus on more profitable markets, exiting Bellingham which contributes about 40% of passenger traffic and three other airports.
This disruption has also led to a slowdown in pilot hiring and strained resources for airlines relying on new aircraft.
Boeing, the largest U.S. exporter, employs nearly 150,000 people and supports millions more through its supply chain. The company contributes about $1 trillion annually to the U.S. economy, supporting over 5 million jobs.
Under regulatory pressure, Boeing has committed to prioritizing safety over speed, slowing down jet production.
In the first half of 2024, Boeing delivered 175 jets, a 34% decrease from the previous year, and 46% fewer than its European competitor, Airbus.
This slowdown has delayed benefits for suppliers and impacted airlines’ preparation and infrastructure costs.
U.S. budget carrier Allegiant Travel Co. (NASDAQ:ALGT) reported that delivery delays are costing it about $30 million annually.
United Airlines Holdings Inc. (NASDAQ:UAL) and American Airlines Group Inc. (NASDAQ:AAL) have reduced their hiring plans due to fewer aircraft deliveries.
Since the January incident, Boeing has implemented major management changes and increased inspections at its facilities and those of its suppliers.
Boeing stock has lost more than 11% in the last 12 months. Investors can gain exposure to the stock via IShares U.S. Aerospace & Defense ETF (BATS:ITA) and Invesco Aerospace & Defense ETF (NYSE:PPA)
Price Action: BA shares are trading lower by 0.52% at $185.09 in premarket at last check Wednesday.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.