|12 June, 2019

Boeing order drought compounds 737 MAX woes

Boeing’s deliveries fell by more than half in May from a year earlier to just 30 planes

Two workers walk under the wing of a 737 Max aircraft at the Boeing factory in Renton, Washington, U.S., March 27, 2019.

Two workers walk under the wing of a 737 Max aircraft at the Boeing factory in Renton, Washington, U.S., March 27, 2019.

REUTERS/Lindsey Wasson

NEW YORK - Boeing’s grounded 737 MAX may not be the end of its woes. Global airlines have turned stingy lately, ordering no new planes from the $200 billion U.S. aerospace giant in May and only one from its 100 billion-euro transatlantic rival Airbus. Boeing already faces a lengthening delay in getting its best-selling jet back in the air. A weaker aviation market is the last thing the company and its owners need.

Boeing’s deliveries fell by more than half in May from a year earlier to just 30 planes. The 737 MAX accounted for roughly half its shipments before it was grounded worldwide in March after the second crash in five months. But failing to book a single order is unusual. The slowdown has also hit Boeing’s popular 787 Dreamliner. Subtracting cancellations from new orders, the company has gained just 15 net orders so far this year.

It’s not just a problem for the company run by Dennis Muilenburg. At Airbus, cancellations outnumber orders by 57 aircraft through May. That suggests investors who have bid up the company’s shares by nearly 50% this year to an all-time high this week may be over-optimistic. Boeing shareholders have been more circumspect, with the stock declining further since it was slammed after the crash in March – though it’s still up for the year so far.

A pause is hardly a disaster for the two rivals whose still-plump order books will keep them busy for at least the next six years. But airline earnings have started to come under pressure, with Europe’s Ryanair last month reporting its weakest annual profit in four years. Carriers may be reluctant to commit more capital with global economic growth slowing.

Meanwhile there’s no clear timetable for returning the 737 MAX to service. An official of the U.S. Federal Aviation Administration told Bloomberg that might not be until December, several months later than the company and its customers have been hoping. Breakingviews has calculated that each month’s grounding can dent the company’s sales by $1.8 billion and earnings by over $200 million; airline compensation will add to the tab. Declining orders will make it that much harder for Muilenburg to right the Boeing ship.

CONTEXT NEWS

- Boeing on June 11 reported it had booked no new aircraft orders in May and had recorded a net total, after deducting cancellations, of 15 in the first five months of this year after the removal of 82 737 MAX orders as a result of contractual changes. The company delivered 30 airplanes in May, down from 68 in the same month of 2018.

- European rival Airbus delivered 81 aircraft in May, up 59% from May last year. It booked an order for just one jet last month and a net total of minus 57 orders for the first five months of the year after 125 cancellations, the company said on June 6.

- Boeing’s grounded 737 MAX aircraft will be back in the air by December, an official of the U.S. Federal Aviation Administration told Bloomberg on June 12. Ali Bahrami, the agency’s associate administrator for aviation safety, said that while the FAA is “under a lot of pressure,” the aircraft would be returned to service “when we believe it will be safe.”

- The FAA on May 23 briefed foreign aviation regulators on steps it was taking to address the causes of 737 MAX crashes in Ethiopia in March and in Indonesia in October 2018, which claimed 346 lives. Boeing said on May 16 it had completed an update of the plane’s anti-stall software, which was triggered before those accidents.

(Editing by Richard Beales and Amanda Gomez)

© Reuters News 2019

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