Southwest CEO vexed at 737 Max delays

Bloomberg

Southwest Airlines Co is frustrated with the financial beating it’s taking from the grounding of Boeing Co’s 737 Max. But the carrier is ready to grab more of the single-aisle planes that eventually will make up the majority of its fleet.
Parking its 34 Max jets since mid-March and missing out on new deliveries has shaved $225 million from operating income this year, Southwest said. That prompted the airline to pull out of Newark, New Jersey, and to delay the retirements of seven older, fuel-guzzling 737-700s. The Max void caused the “vast majority” of 20,000 flight cancellations last quarter, the company said.
Still, CEO Gary Kelly says he would look closely at any chance to add more of the upgraded 737s, while declining to say whether Southwest is in talks with Boeing. Ryanair Holdings Plc, Europe’s largest 737 operator, and Australia’s Qantas Airways Ltdare among airlines that have signaled
they might be willing to add Max planes opportunistically as Boeing works to end a sales drought after regulators grounded the jet.
“We’ve made no secret that we have fleet modernisation as one of our key strategic initiatives,” Kelly said in an interview. “That means more Max, less -700s. If there’s an opportunity to pick up more Maxes, we’d certainly look at that very, very carefully.”
Vote of Confidence
Boeing landed a much-needed commitment from British Airways owner IAG SA for 200 of the planes last month. Any purchases by Southwest, which has an all-737 fleet, would be another big vote of confidence in the beleaguered Max, which crashed in October and again in March. The accidents killed 346 people.
The planemaker faces a jumbled delivery schedule once the Max is cleared to fly in the US — and that may provide an opportunity for buyers. While Boeing is producing fewer of the planes than planned, some airlines or lessors may want to postpone delivery dates due to market conditions, pilot training requirements or uneasy passengers.
Southwest became the first US carrier to give up on resuming flights this year, pulling the Max from its flight schedules through January 5 as it and other airlines await regulatory approval to restart operations.
That means Southwest’s capacity will decline as much as 2 percent this year instead of growing nearly 5 percent as originally planned.
On a conference call to discuss second-quarter financial results, Kelly was clear about his frustration. The ongoing delays have been “very painful” for both Southwest and Boeing, its longtime aircraft supplier, he said.
“As we look at route performance, market after market, it’s obvious we are short capacity, that we’re spilling traffic and leaving money on the table and helping our competitors,” he said on the call. “That is not anything we will leave unattended.”
Frustrated by that unusual loss in market share, Southwest management “will likely be aggressive as they fight to get those customers back on their aircraft,” Cowen & Coanalyst Helane Becker said in a note to investors.
Southwest expected to receive 41 more Max planes this year, but now thinks it will get only 16, with the rest slipping until 2020. About six of those, it said, are likely to shift into 2021.
“It’s really all about the Max. That’s the only issue that we are dealing with,” Kelly said. “Everything else with the company is rock solid.”

American Air stock drops, sees $400mn blow on Max
Bloomberg

Airlines Group Inc forecast a $400 million drag on this year’s pretax earnings from the grounding of Boeing Co’s 737 Max jetliner.
The impact of the flying ban includes a $175 million blow in the second quarter, American said. The world’s largest carrier has removed the beleaguered plane
from its schedule through November 2. American, which has 24 Max jets, is getting a modest silver lining from the grounding, which has given airlines more room to raise fares by cutting the number of seats available.
American had record sales in the second quarter and said demand remains robust. The company raised its 2019 earnings forecast to at least $4.50 a share, from a previous outlook of no less than $4. Delta Air Lines and United Airlines Holdings raised their 2019 profit forecasts.
American said its operations continue to be hobbled by a “significant number of flight cancellations and delays” from what the company has said is a work slowdown by its mechanics union.