Boeing’s problems just cost United $200 million
By Chris Isidore, CNN
New York (CNN) — United Airlines was pushed into the red by Boeing and its ongoing quality issues, the airline said Tuesday. The company took a $200 million hit in the first quarter after the Boeing 737 Max 9 was grounded following the door plug incident aboard an Alaska Airlines flight.
United did not say whether or not it expects to be reimbursed by Boeing for the cost of the grounding of its 737 Max 9s for three weeks following the January 5 incident. But it did say that it would have been profitable without the cost of the grounding.
The blow out of a door plug on an Alaska Airlines flight caused a three-week grounding by the Federal Aviation Administration of the 737 Max 9 model of jets, and brought fresh questions about the safety and quality of Boeing planes. United, which depends on Boeing planes for about 80% of its mainline fleet, had 86 of the Max 9 jets, more than any other airline in the world and it was hit particularly hard by Boeing’s problems.
But United has also been hit with a series of other incidents, including engines catching on fire and wheels falling off of planes, problems that got increased attention in the wake of Boeing’s problems. It has forced United CEO Scott Kirby to reach out to customers to assure them the airline would itself make a greater focus on safety by its own employees. The FAA has also said it is putting United under greater scrutiny.
Boeing’s publicity woes and the grounding of the jets weren’t the only way that the airplane manufacturer hurt United.
The airline said Tuesday it now expects to take delivery of only 61 single-aisle jets from Boeing this year, or 40 fewer than it had anticipated at the start of the year. The airline had previously disclosed it had put a freeze on the hiring of pilots, and that it is asking pilots to accept voluntary unpaid furloughs due to the cut in the number of flights it is operating.
United now says it no longer expects the Boeing 737 Max 10, the latest and longest version of the Boeing 737, to be delivered this year. That plane has not been certified to carry passengers as yet by the FAA. With questions about the quality and safety of Boeing jets, the certification has likely been pushed back to at least 2025.
So United said it has converted a portion of those Max 10 orders to the Max 9 for deliveries from 2025 through 2027, and said it may convert more orders to the smaller versions of that plane.
Of more concern to Boeing, United also said Tuesday that it has reached agreements with two lessors to lease 35 new Airbus A321neos, a 737 Max competitor. Deliveries of those Airbus planes is due in 2026 and 2027.
Asked for a comment on United’s loss estimate, Boeing pointed to comments made to investors last month by Brian West, its CFO, that suggested Boeing is prepared to compensate affected airline customers.
“We put the customers in tight spot,” he said. “As it pertains to the events of January the 5th, of course, there’s customer consideration that is going to manifest itself in the quarter and we’ve got to take care of that and we’re well down the road to do that. And we continue to stand behind our customers with that responsibility.”
United said it had an adjusted loss of $50 million in the quarter, an improvement from the $207 million loss it had in the same period of last year. Revenue was up nearly 10% to $12.5 million.
Most of that gain came because the miles flown by paying passengers rose 9%, as United was able to increase capacity from a year earlier despite the 737 Max 9 grounding. The measures of fares, such as the average amount paid by passengers for each available seat, adjusted for miles flown, were up about 1%.
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