American Airlines is reportedly on the brink of canceling part of its order for the Boeing 737 MAX. Sources have said that the US big three carrier is unable to secure financing, and as such is close to walking away. It’s a swift about-turn for the airline, which just weeks ago said it would stand by its order. It couldn’t have come at a worse time for Boeing.
17 aircraft may not be delivered
Reported exclusively today in the Wall Street Journal, sources have claimed American Airlines could be on the verge of canceling part of its order for the Boeing 737 MAX. The airline has apparently struggled to secure financing for the 17 737 MAX it had expected to be delivered from Boeing this year.
In recent weeks, executives of American Airlines have reportedly informed Boeing that they didn’t have sufficient funding to pay for the new jets. They said they would be forced to cancel some of their order if Boeing didn’t help them secure the necessary financing for the deal.
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The about-turn by American Airlines will come as a blow to Boeing, particularly as it was AA’s push for a more fuel-efficient narrowbody that spurred the manufacturer to develop the MAX in the first place. American Airlines is the 10th largest customer for the jet, with an order of 100 of the type on Boeing’s books.
At the point of grounding, American Airlines had 24 737 MAX in its fleet, all of which have remained on the ground since March 2019. Despite the challenges presented by the current crisis in aviation, CEO Doug Parker said in April he didn’t intend to defer any orders for the MAX. He said,
“At this point, the new airplanes we have scheduled to come, we want. They’re great aircraft that will replace some of those aircraft that are leaving. We don’t have any intention of working with the manufacturers to defer or cancel any of those orders.”
However, we are now two months down the line, and the outlook has become more apparent. With predictions that travel demand won’t pick up any time soon and the prospect of mass layoffs in the fall, American is clearly re-evaluating its position. Other US airlines have moved to defer deliveries, with Delta saying it will not take any new aircraft this year at all.
Boeing will struggle
If American does move to cancel its 17 737 MAX deliveries, that leaves Boeing with 17 more completed and undeliverable aircraft in its facilities. American would join a number of other airlines and leasing companies who have canceled their orders, most recently Norwegian, who last month said it would cancel all 92 it had on order.
In total, since the start of the year, Boeing has had more than 600 cancellations for its flagship narrowbody plane. While not all of these will have been built and ready o delver, there is certainly a growing pool of ‘white tails’ parked around Boeing’s facilities.
The terms of Boeing’s orders mean that, if deliveries are delayed by more than a year, purchasers can generally walk away without paying a penalty. This means we could see many more cancellations as the summer goes on, as airlines work to wriggle out of deliveries that just aren’t needed at the current time.
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