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United Airlines executives said Tuesday they are weighing alternative plans for future growth after the Boeing 737 Max 9 was grounded following an air accident on an Alaska Airlines flight earlier this month.
United, which currently operates 79 Max 9 aircraft, expects to post a loss in the first quarter due to the grounding. But the uncertainty over 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 jets.
“The reality is that the Max ban was the last straw because we believe the Max 10 will meet the schedule we had hoped for,” United Chief Financial Officer Michael Leskinen told analysts in an update to the financial results the airline.
United is not canceling its Max 10 order, CEO Scott Kirby said: However, the company no longer expects them to be delivered on time.
“Boeing will not be able to meet its contractual deliveries for at least many of these aircraft, and I’ll leave it at that,” Kirby said.
United had hoped to include Max 10 jets in its future growth plans, but uncertainty over when the Federal Aviation Administration will certify the plane as ready for passengers means the airline will have to move forward without counting on those aircraft deliveries.
Kirby said he remains confident in the aircraft maker.
“They're going through a rough patch right now, but I believe that Boeing, from top to bottom, is committed to changing and fixing the problem,” Kirby said.
After the mid-air failure, critics ask: Has Boeing learned from the Max crashes?
The financial and operational impact of the grounding could be even more severe for Alaska Airlines, which is due to report earnings on Thursday. Although the airline has a smaller number of Boeing Max 9 aircraft, the 65 aircraft represent more than 25 percent of Alaska's main fleet.
United's financial forecast and executives' comments underscore the mounting 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 a gaping hole. No one was seriously injured, but the FAA grounded the plane the following day and worked with Boeing on a plan to inspect the other Max 9s currently in service to ensure their safety. The grounding has resulted in thousands of canceled flights for both United and Alaska and has shaken confidence in Boeing.
The disruptions come after a relatively smooth year for the airline industry following the rocky recovery from the coronavirus pandemic, with the cancellation rate falling to 1.2 percent, according to federal data. The improved conditions strengthened airlines' finances, with United reporting a profit of $600 million for the final quarter of 2023.
Stan Deal, the head of Boeing's aircraft division, acknowledged the disruptions Tuesday and said the company was following the FAA's lead.
“We have failed our airline customers and deeply regret the significant disruption to them, their employees and their passengers,” Deal said in a statement. “We are taking action on a comprehensive plan to safely return these aircraft to service and improve our quality and delivery performance.”
Boeing did not respond to questions about the future of the Max 10, which is still subject to preliminary review by the FAA.
Kirby said the airline's technical team had been working 18-hour days for the past few weeks to ensure the Max 9 could be safely returned to service when it was not grounded.
FAA is investigating possible flaws in Boeing's manufacturing process
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. airline After the FAA confirmed they were safe to fly again after fatal crashes in Indonesia and Ethiopia.
The cause of the Alaska incident remains under investigation. Officials are trying to determine whether the screws meant to hold the plug in place were installed properly. That has raised new questions about Boeing's quality control. The FAA has launched a separate review of the company's manufacturing process and Boeing has hired a new internal consultant to conduct an internal review.