Boeing’s 737 Max afflictions worsen
American Airlines, Southwest Airlines deliver more bad news for plane maker
Fallout from the global ban on Boeing ’s 737 Max deepened as American Airlines warned that profit this year would take a Us$400-million hit, while Southwest Airlines scratched the jet from its schedule into next year.
American Airlines Group Inc. said Thursday that the drag on its annual pre-tax profit would include a Us$175-million hit for the second quarter and an expected Us$125-million penalty in the third.
Meanwhile, Southwest Airlines Co. said caution dictated removing the Max from its schedule through Jan. 5, becoming the first U.S. carrier to drop the grounded aircraft for the rest of this year. The airline also will stop flights at Newark Liberty International Airport outside New York City.
The announcements, made as the carriers reported earnings, came a week after Boeing Co. said it would take a Us$5.6-billion pre-tax charge to compensate Max customers. The manufacturer on Wednesday said it might need to halt output of the plane. The narrow-body jet — a fuel-efficient workhorse — was grounded globally in March after two crashes killed 346 people.
For now, American has kept its two dozen Max aircraft from its schedule through Nov. 2.
“’We really don’t have any new information that leads us to make changes,” president Robert Isom said on a conference call with analysts. “Based on what we know today, we should be able to hit the timeline.”
There’s a slim silver lining from the grounding. With fewer seats for sale and high demand for travel, airlines have been able to raise fares and still fill planes.
American said revenue for each seat flown a mile, a gauge of pricing power known as unit revenue, would increase one per cent to three per cent in the current quarter.
The Fort Worth, Texas-based carrier had record sales in the second quarter and raised its 2019 earnings forecast to at least US$4.50 a share from a previous outlook of no less than US$4.
“We’ve looked ahead in future months and are not seeing really anything that would make us concerned at this point around continued strength in domestic demand,” said Don Casey, American’s senior VP of revenue management.
Boeing has said it expects that regulators will return the Max to service in the fourth quarter. Southwest accepted that estimate but said it could take two months to get aircraft out of mothballs and comply with any changes ordered by authorities, such as pilot training. The Dallas-based airline previously had pulled the plane from schedules through Nov. 2.