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Boeing Co’s 737 Max may be on track to finally return to commercial service later this year, but the plane’s biggest customer isn’t eager for fresh deliveries.
Southwest Airlines Co doesn’t expect to take any new Max jets this year, Chief Executive Officer Gary Kelly said in an interview with Bloomberg News. The airline had previously said it would add no more than 48 of the planes to its fleet through the end of 2021, and it reiterated that plan in a filing.
But the back-end weighting of these deliveries puts significant pressure on a post-pandemic travel recovery that has been volatile and remains highly uncertain in the absence of a widely available vaccine.
While bookings for leisure travel improved in May and June, the nascent recovery in demand has stalled in July amid a resurgence of coronavirus outbreaks across America, Southwest said as it reported a second-quarter net loss of $915 million. As a result, the company now feels like it’s offering too many flights in August and September relative to demand. “We will adjust our flight schedule aggressively and frequently in response to this volatile demand environment,†Kelly said in a statement. And that will likely mean flying few Max jets for the time being.
The downbeat outlook provides a dose of reality for Boeing’s rally on signs of progress for the grounded Max jet. The Federal Aviation Administration said it’s preparing to issue formal legal directives for repairs of the plane, which indicates the agency is finally comfortable with proposed fixes some 16 months after the second of two fatal crashes prompted regulators around the world to ban the plane from commercial flight.
The public gets 45 days to comment on the FAA’s action and there remain final additional steps in the un-grounding process, which likely pushes the plane’s return back to October. That will put a crimp in Boeing’s plans to resume deliveries during the third quarter, but such a delay hardly matters much in a time when airlines are making fresh cuts to their capacity.
On the positive side for Boeing, American Airlines Chief Financial Officer Derek Kerr said that the airline was planning to take delivery this year of 17 Max jets that are either already built or in the process of being built, pending regulatory approval.
—Bloomberg