Boeing set to lose biggest planemaker title

Source:Reuters-Global Times Published: 2019/7/11 16:13:41

Airbus on course to overtake leading competitor as deliveries rise 28% in first half year

A Boeing 737 MAX 9 taxis to its hangar following its first flight at Boeing Field on April 13, 2017 in Seattle, Washington. Photo: VCG

Boeing Co is set to lose its standing as the world's biggest planemaker after reporting a 37 percent drop in deliveries for the first half of the year due to the prolonged grounding of its best-selling MAX jets.

Boeing deliveries lagged behind those of Airbus SE, which on Tuesday said it distributed over 389 planes in the same period, up 28 percent from a year earlier. 

The numbers indicate that Boeing's full-year deliveries are likely to fall behind its European rival for the first time in eight years.

A new problem identified in the grounded MAX jets last month has delayed the aircraft's entry into service until the end of September at the earliest, disrupting schedules for airline operators and possibly adding to costs for Boeing.

To cope with the fallout after the grounding, Boeing has slowed production to 42 MAX jets per month from 52 earlier, causing the planemaker to take a $1 billion charge in the first quarter.

J.P. Morgan analyst Seth Seifman has speculated that the new delay could prompt Boeing to consider another production cut and book an additional charge in the second quarter, hurting 737 margins further.

Deliveries of the MAX aircraft were halted in March after an Ethiopian Airlines crash killed all 157 people on board. Since then, Boeing has not reported any new order for the MAX planes.

Several analysts have lowered their full-year 2019 delivery estimates for the MAX, and many do not expect the aircraft to be distributed to customers before December.

Last month, Jefferies analyst Sheila Kahyaoglu said she expected zero MAX deliveries in the second and the third quarters of 2019, with a full-year number of MAX deliveries at around 236. Boeing delivered a total of 580 737s in 2018.

The American planemaker's net orders for the first six months were in negative territory, with a total of minus 119 net orders, lagging behind Airbus which won 88 net orders between January and June.

Saudi Arabian budget airline flyadeal will not proceed with a provisional $5.9 billion order for Boeing 737 MAX aircraft, instead opting for a fleet of Airbus A320 jets. 

Flyadeal announced on July 7 that it would take delivery of 30 A320neos ordered by its parent company, state-owned Saudi Arabian Airlines, at the Paris Air Show in June.

"This order will result in flyadeal operating an all-Airbus A320 fleet in the future," it said.

Flyadeal, which has operated leased A320 jets since launching in September 2017, will receive deliveries of the new Airbus aircraft from 2021. 

Flyadeal signed a commitment to order 30 737 MAX jets in December, choosing the aircraft over the A320neo. 

The provisional order, which included additional purchasing options for 20 MAX jets, was worth $5.9 billion at list prices, according to Boeing.

Oman Air warned in June that it would hold talks with Airbus if Boeing did not provide support and recovery for the MAX. Meanwhile, Emirati carrier flydubai said in April that it may order A320neos as replacements for the MAX jets.

A few airlines have shown confidence in the MAX since the fatal crash, with British Airways-owner IAG last month signing a letter of intent to order 200 versions of the aircraft.

Repairing image

Boeing Co said on July 3 that it would give $100 million over multiple years to local governments and non-profit organizations to help families and communities affected by the deadly crashes of its 737 MAX planes in Indonesia and Ethiopia.

The move appears to be a step toward repairing the image of the world's largest planemaker.

Boeing is the target of a US Department of Justice criminal investigation into the development of the 737 MAX, regulatory probes and more than 100 lawsuits by victims' families.

The $100 million, which is less than the list price of a 737 MAX 8, is intended to help with education and living expenses and to spur economic development in affected communities, Boeing said. 

It did not specify which authorities or organizations would receive the money.

Many of the passengers on board the Ethiopian Airlines flight were aid workers or involved with health, food, or environmental programs.

"If the money is spent on furthering the work of the people on that airplane it would be money well spent," said Justin Green, a New York-based attorney representing several of the Ethiopia crash victims.

But he said the fund would not affect his clients' courtroom strategy: "What families really want to know is why this happened. Could this have been avoided?"

Anton Sahadi, a representative of relatives of the Lion Air crash victims, said the families appreciated the $100 million fund but it did not mean they would stop filing lawsuits.

"We will continue to fight for our rights in the courts," he said. "Boeing is doing this to build their image back."

Boeing has also offered to match any employee donations in support of the families and communities impacted by the accidents through December.


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