Boeing faces bumpy ride as latest problems give Airbus advantage in battle for the skies
US plane maker lags behind European rival in terms of valuation and aircraft deliveries, amid focus on quality
Boeing’s growing list of woes is helping its European rival Airbus have a bigger edge in the plane makers’ duopoly of the skies, with attention now more on quality.
The US plane maker may be forced to accept a lower market share in terms of volume than previously, said Cirium Ascend Consultancy.
“While Boeing may have focused on defending market share in the past, it’s current focus is clearly on quality and not quantity,” Chris Wills, head of consultancy operations at Cirium, said. “We might see Boeing accept lower market shares for the time being in terms of volume than we have in the last two decades.”
In February, Airbus delivered 49 commercial planes to 28 customers, according to its latest report. In contrast, Boeing handed over 27 aircraft last month to 22 customers.
In the first two months of this year, the US company has delivered 54 planes while Airbus has widened its lead over its rival, delivering 79 planes in the same period.
The tide has turned against Boeing in the last few years amid a barrage of negative developments, including two fatal 737 Max crashes and a lengthy grounding of the jet.
A series of incidents involving Boeing jets this year, including the mid-air blowout of a door panel on an Alaska Airlines 737 Max 9 aircraft, have continued to plague the company. This has forced airlines to re-examine their fleet expansion plans amid slower production rates and delayed deliveries.
Boeing’s share price has plummeted by 29 per cent this year, dragging its market valuation down to $112.4 billion, taking Airbus’s lead over its rival to its widest on record.
The value of the Arlington, Virginia-based plane maker was about $24 billion lower than its main competitor, as of market close on Tuesday.
Boeing’s plans to acquire its supplier – and former subsidiary – Spirit AeroSystems could enhance quality, enabling a faster path to the higher production rates required to boost profit and cash flow, according to a research note by Bloomberg Intelligence.
“A Boeing purchase of Spirit Aerosystems is likely the safest and fastest way to stabilise production for its two most important airplanes, the 737 and 787, and boost build rates, which will improve cash flow and profit,” George Ferguson and Melissa Balzano, Bloomberg Intelligence’s aerospace industry analysts, said in the report last week.
The US Federal Aviation Authority has imposed curbs on the Max production line after the Alaska Airlines incident in which a door panel flew off its hinges at about 16,000 feet on January 5. This has led to inquiries into the Boeing’s safety and quality standards in its production process.
“At the core of Boeing’s turnaround is increasing build rates to reduce overhead costs and improve economies of scale,” Mr Ferguson and Ms Balzano said. “Recent challenges in the manufacturing process are preventing these increases and heightening the risk of a prolonged market share below Airbus.”
Boeing’s latest manufacturing problems probably stem, in large part, from high employee turnover after the grounding of the 737 Max, difficulties in replacing skilled workers and the Covid-19 pandemic, Mr Ferguson said in a separate report.
The plane maker’s slower production rate and delivery delays have frustrated airline chief executives who are eager to raise capacity to meet a post-pandemic boom in travel demand.
Dallas-based Southwest, the biggest customer for the smaller 737 Max 7, said in a filing on Tuesday that Boeing had advised it to expect 46 Max 8 jet deliveries this year, down from the previously expected 79. “As a result of Boeing’s continued challenges, the company expects the delivery schedule to be fluid and, therefore, plans to reduce capacity and re-optimise schedules, primarily for the back half of 2024,” Southwest said.
This is expected to reduce fullyear capacity by one full point, it said. As a result, the airline is also re-evaluating past guidance for this year, including capital
The mid-air blowout of a door panel on an Alaska Airlines 737 Max 9 aircraft in January has hit the company hard
spending expectations, it said. Last week, Etihad Airways’ chief executive said delivery delays by Boeing were hampering the airline’s network growth plans. The airline took delivery of three new Boeing 787-9 Dreamliners in February, eight months after a handover scheduled for June 2023, and this has affected route network plans, Antonoaldo Neves told The National.
If delays continue at Boeing, it could lose further market share to Airbus, analysts previously told The National.
Airbus could secure more orders from airlines re-evaluating their fleet strategies, particularly for narrow-body aircraft where the A320 family competes directly with the 737 Max, they said.