Aviation Financiers Tackle Aircraft Shortages Amid Boeing 737 Max Turmoil
As the aviation industry grapples with the aftermath of a mid-air cabin blowout on a Boeing 737-9, financiers are convening for the first time to address the intensifying aircraft shortage and heightened safety concerns. The incident, involving an Alaska Airlines jet earlier in January 2024, has pushed Boeing into a renewed safety dilemma, prompting increased regulatory scrutiny and factory inspections.
This crucial gathering in Dublin, a hub for global air finance, brings together lessors, bankers, and airlines to deliberate over the supply chain implications stemming from the recent Boeing 737-9 grounding. The aviation sector, already struggling to match the post-pandemic surge in travel demand due to labor and parts shortages, now faces added regulatory challenges following the alarming near-disaster that necessitated an emergency landing.
Rob Morris, head of global consultancy at Ascend by Cirium, expressed to Reuters that while demand is robust, the key issue remains the timing of supply alignment. With an initial forecast of supply catching up by 2026 or 2027, the Boeing MAX crisis could further delay this recovery.
In an unprecedented move, the Federal Aviation Administration (FAA) recently ordered Boeing to halt any increase in 737 MAX production until it resolves quality control issues. The duration of this production limit is uncertain, but industry experts anticipate continued stringent regulatory oversight even after it is lifted, potentially impacting production forecasts.
The latest safety crisis, marked by the cabin blowout and subsequent findings of loose bolts, compounds the challenges faced by Boeing, making aircraft development more complex and production slower. This situation is exacerbated by ongoing supply chain disruptions post-pandemic.
Steven Udvar-Hazy, executive chairman of Air Lease Corp, highlighted the manufacturing challenges faced by Original Equipment Manufacturers (OEMs) at the Airline Economics conference. This predicament could benefit leasing companies with substantial existing plane orders, potentially yielding higher returns on investments as airlines turn to leasing amid delivery delays.
However, for airlines, this could translate into delays in acquiring new technology crucial for cost reduction and emission control, alongside increased leasing rates, potentially leading to higher airfares.
The Dublin conference, a significant event for the aviation industry, represents a critical juncture for Boeing’s reputation among fleet owners. Calls for leadership changes at Boeing, including from analysts like Richard Aboulafia, reflect the mounting pressure on the company. Boeing’s response to these criticisms remains cautious, with CEO Dave Calhoun committing to addressing errors and preventing a recurrence of incidents like the Alaska Airlines blowout.
Investors and industry professionals will closely monitor the response and tone of major leasing companies’ executives, signaling the industry’s confidence level in Boeing amidst this ongoing crisis.
Sources: AirGuide Business airguide.info, bing.com, reuters.com