United Airlines executives said Tuesday they are weighing alternative plans for future growth following the grounding of the Boeing 737 Max 9 after a midair blowout on an Alaska Airlines flight earlier this month.
United, which currently operates 79 Max 9 planes, expects to report a first-quarter loss because of the grounding. But uncertainty about the jets also raises questions about when a new, larger version of the plane will be ready — United has orders for 277 Max 10 jets, with an option to buy 200 more.
“The reality is that with the Max grounding, this is the straw that broke the camel’s back with believing that the Max 10 will deliver on the schedule we had hoped for,” Michael Leskinen, United’s chief financial officer, told analysts during an update on the airline’s financial results.
United is not canceling its order for Max 10s, CEO Scott Kirby said, but the company no longer expects them to be delivered on time.
“Boeing’s not going to be able to meet their contractual deliveries on at least many of those airplanes and I’ll just leave it at that,” Kirby said.
United had hoped to incorporate Max 10 jets into its future growth plans, but uncertainty surrounding when the Federal Aviation Administration will certify the plane as ready for passengers means the carrier will have to move forward without counting on those plane deliveries.
Kirby said he remained confident in the airplane manufacturer.
“They’re going through a rough patch right now but I believe that Boeing is across the board from top to bottom committed to changing and fixing it,” Kirby said.
The financial and operational impact of the grounding could be even more significant for Alaska Airlines, which is scheduled to report earnings on Thursday. Though the carrier has a smaller number of Boeing Max 9 aircraft, the 65 planes make up more than 25 percent of Alaska’s mainline fleet.
United’s financial forecast and the executives’ comments underscore the widening fallout from the Jan. 5 incident on the Alaska flight, in which a plug covering an optional emergency exit flew off the side of the plane, leaving it with a gaping hole. No one was seriously hurt but the FAA grounded the plane the following day and has been working with Boeing on a plan for inspecting the other Max 9s currently in service to ensure their safety. The grounding has led to thousands of canceled flights at both United and Alaska, and shaken confidence in Boeing.
The disruptions come after a relatively smooth year for the airline industry, following the bumpy recovery from the coronavirus pandemic, with the cancellation rate dropping to 1.2 percent according to federal data. The improved conditions boosted airlines’ finances, with United reporting $600 million in profits for the final quarter of 2023.
Stan Deal, the head of Boeing’s airliner division, acknowledged the disruptions Tuesday and said the company was following the FAA’s lead.
“We have let down our airline customers and are deeply sorry for the significant disruption to them, their employees and their passengers,” Deal said in a statement. “We are taking action on a comprehensive plan to bring these airplanes safely back to service and to improve our quality and delivery performance.”
Boeing did not respond to questions about the future of the Max 10, which is still under a prelaunch review by the FAA.
Kirby said the airline’s technical team has been working 18-hour days over the past several weeks to ensure the Max 9 will be able to return to service safely when it is ungrounded.
United is a major Boeing customer. In June 2021, the airline announced its largest aircraft order in company history: 200 Boeing 737 Max aircraft and 70 Airbus A321neos. At the time, the order was a huge boost for the 737 Max and the largest by a U.S. carrier after the FAA certified they were safe to fly again following fatal crashes in Indonesia and Ethiopia.
The cause of the Alaska incident is still under investigation, with officials seeking to determine whether bolts designed to hold the plug in place were properly installed. That has raised fresh questions about Boeing’s quality control. The FAA has launched a separate review of the company’s manufacturing process and Boeing has appointed a new internal adviser to carry out an internal review.
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