Airlines Can Complain About Boeing All They Want. It Doesn’t Matter.

Airlines that buy the planes can complain about problems such as the emergency-exit plug that blew out on a Boeing jet this month, but they have nowhere else to go.

China Southern Airlines
took delivery of a 737 MAX 8 jet, according to reports based on sightings of the plane. Boeing didn’t respond to a request for comment.

That would be the first direct delivery of a MAX jet to a Chinese airline in almost five years. The MAX was grounded worldwide from March 2019 to November 2020 after two deadly crashes within five months. The crashes were linked to flight control software. Once fixed, the MAX was allowed to fly again and deliveries resumed to much of the world.

Boeing has delivered some 1,400 MAX jets, including 1,000 since the first grounding was lifted, but none went to China. Part of the reason was that China didn’t need the capacity. Covid-19 restrictions kept demand depressed.

The fact that the delivery was to a Chinese airline, and that it happened while 737 MAX 9 jets are grounded after the midair blowout of a door plug, resulting in an emergency landing and more regulatory oversight, shows how badly airlines need new planes and how limited their choices are.

Choice has been on the minds of investors lately after both
United Airlines
and
Alaska Air
—two big Boeing customers—expressed disappointment with the aerospace company. The complaints even generated an apology from Boeing Commercial Airplanes CEO Stan Deal.

Copa,

Southwest Airlines,
and
Ryanair
CEOs have talked about their frustration, too, pointed out TD Cowen airlines analyst Helane Becker.

“While they can look at other aircraft, Boeing and
Airbus
are monopolies,” she said.

A duopoly is the better word, but the point is the same. Only Boeing and Airbus make large commercial aircraft. The pair took in some 3,000 orders for new single-aisle jets in 2023; they made roughly 1,000.

Setting Boeing’s current problems aside, the supply-and-demand backdrop is solid. Both companies have a decade-plus backlog at current production rates.

“Airbus is sold out on the A321 for a number of years,” said Vertical Research Partners analyst Rob Stallard. The A320 family of jets competes with the 737.

“The airlines could switch to other MAX models—I suppose if the [MAX] 10 is delayed—but that’s not ideal,” he said. “If I were them I’d be going back to Boeing wanting a better price.”

The MAX 10 is another longer version of a MAX that hasn’t been certified by aviation regulators yet.

A lack of alternatives doesn’t mean things will go smoothly for airlines. Southwest told investors on Thursday that it had removed the MAX 7 from its 2024 fleet plan. The MAX 7, like the MAX 10, isn’t certified by aviation authorities. Southwest expected the plane to enter service later this year, but now it isn’t so sure.

“The plan is 79 MAX deliveries [to Southwest] in 2024,” wrote Jefferies analyst Sheila Kahyaoglu in a Thursday report. “Since the third quarter, Southwest exercised eight MAX 7 options for delivery in 2025; converted and shifted three 2025 MAX 7s to three 2024 MAX 8s.”

One option that airlines have is to change plane types. The MAX 8 accounts for most of the MAX jets in service and Boeing can build those while it works with the FAA on MAX 7 and MAX 10 certification.

“In the short and medium run, switching costs are high and wait times for Airbus jets are very high,” said AeroDynamic Advisory managing director Richard Aboulafia.

”If they don’t care about the long run,” he said, “Boeing management doesn’t need to worry about customer defections to any great degree.”

Aboulafia would like to see Boeing develop an all-new jet. New planes take billions of dollars and roughly a decade to produce. Today’s decisions about product lineup would affect Boeing’s market share in 2040.

The biggest risk for Boeing in the next few years might be rising production rates at Airbus. If that happens, Airbus could take a little more market share from Boeing. Still, it would be years before anyone could get planes ordered this year.

Without more plane makers, Becker said, the best solution for airlines is simply for Boeing to “get your act together.”

In Thursday trading, Boeing stock was down 6.4% after rising 2% on Wednesday. An analyst downgrade and FAA comments about constricting MAX production weighed on shares. The
S&P 500
and
Nasdaq Composite
were both up about 0.2%.

Write to Al Root at [email protected]