150 737 Max orders canceled, Boeing says

Boeing’s commercial airline customers canceled 150 737 Max orders in March, the company announced last week, the latest in a string of bad news for the aerospace behemoth hurting from the one-two punches of the 737 Max crisis and covid-19.

Earlier this month, Avolon, an airline leasing company said it had canceled an order for 75 planes, representing about $8 billion in sales. Analysts predicted that the number of order cancellations or deferments would continue, especially for the 737 Max, which has been grounded worldwide for more than a year.

“This is just the beginning,” said Mike Boyd, an aerospace analyst. “There’s going to be more cancellations. The plane just doesn’t have the same economic value it did six months ago.”

Boeing has been under fire since its 737 Max crashed twice, killing a total of 346 people. Deliveries of the airplane, which Boeing promoted to airlines in part for its fuel-saving technology, have been on hold and now, with oil prices dropping and air traffic grinding to a virtual standstill, the market for them is dwindling, analysts said.

During the first quarter of this year, Boeing saw a decrease of 307 commercial airplane orders. Of the 5,000 planes Boeing has on back order, more than 4,000 are for the 737 Max.

“There’s no real value in saving 15% on fuel when the price of oil has dropped far more than that,” Boyd said. Airbus, Boeing’s competitor, is “in the same situation, too, by the way. The need for new airplanes has evaporated.”

“The airline industry is confronting the COVID-19 pandemic and the unprecedented impacts on air travel,” Boeing said in a statement. “We are working closely with our customers, many of whom are facing significant financial pressures, to review their fleet plans and make adjustments where appropriate.”

Given the widespread problems facing the airlines and the aerospace supply chain, the drop in orders is a relatively small concern, said Richard Aboulafia, an aerospace analyst with the Teal Group, a consulting firm.

The real problem is that airline traffic is down some 95% year over year, he said. And even if there is a bounce back later in the year, airline traffic could be down as much as 48% this year.

“The industry has never historically seen anything like this,” he said.

Boeing has asked the federal government to inject $60 billion into the broader aerospace industry. And it is looking to shore up its own bottom line and is looking at how best to participate in the federal stimulus plan.

President Donald Trump has vowed to help the company and said last week he would be meeting with the airlines and Boeing soon.

“We do intend to take advantage of the stimulus in some way,” a Boeing official not authorized to speak publicly said Tuesday. “We’re trying to figure out what the process and protocol will look like with Treasury and what will be the best way to approach it.”