Boeing is pushing Southwest towards Airbus
The B737MAX has been banned for more than seven months now. Throughout this period, Boeing was unable to regain control of the message. The more time passes, the more Boeing’s plummet accelerates while senior management seems completely out of touch with reality. Again, this morning, Boeing’s management said it could return the MAX in service before the end of 2019.
Boeing crisis management
Last Monday, Scott Hamilton of Leeham News, reported that so far, the compensation offered by Boeing to airlines are ridiculous. Thus, Boeing would only offer credits for work done by its subsidiary Boeing Global. The manufacturer would also offer heavy discounts on any orders from B787 and that’s it. No discount on the MAX and no other form of financial compensation. Boeing considers that since the MAX is prohibited from flying, delivery delays are a normal delay. If the airlines want compensation, they will have to sue knowing that it will take years to come to an end. As might be expected, airlines are very dissatisfied with Boeing’s offers.
In addition to tarnishing his image to the public, Boeing is putting his customers at odds. To this must be added the mistrust of regulatory authorities from around the world. The worst thing is that Boeing still has not managed to lift the MAX flight ban. As a bad crisis management, difficult to find more catastrophic.
The situation of Southwest Airlines
Southwest Airlines is probably Boeing’s customer who is most affected by the MAX crisis. Before the crisis began, it had more than 750 Boeing 737s in operation, including 34 MAXs. It still has a balance of 276 MAX on order of which 30 are MAX7 with less than 150 passengers.
Addison Schonland from Airinsight points out that Southwest operates more than 500 B737-700NG configured to 143 seats. Southwest anticipates that approximately 60% of its new aircraft requirements will fall into this category. The fact that Southwest still has not decided to order a large amount of MAX7 is an indication that this aircraft does not seem to fit its needs. The E2-195 is too small and only the A220-300 meets Southwest’s needs.
points out that Southwest operates more than 500 B737-700NG configured to 143 seats. Southwest anticipates that approximately 60% of its new aircraft requirements will fall into this category. The fact that Southwest still has not decided to order a large amount of MAX7 is an indication that this aircraft does not seem to fit its needs. The E2-195 is too small and only the A220-300 meets Southwest’s needs.
Compared with other airlines, Southwest Airlines shares are trading at a higher value. This is because its growth is constant, and investors anticipate it in their valuation. But the crisis of the MAX has put an end to its growth. Southwest must find a way to generate growth without the MAX.
The options
Several US analysts say Southwest could acquire Jetblue. This would allow it to quickly get his hands on the A220s ordered by Jetblue. Buying a competitor is always very expensive and involves a lot of risk. Southwest would have to be really desperate to use this method.
To achieve a historic breakthrough with Southwest, Airbus will be ready to make a miracle. This means that delivery slots will have to be freed or created by the end of 2020 and by 2021. Airbus’ ability to deliver A220s quickly to Southwest will be crucial to getting an order.
The delay
By continuing to target the end of 2019 for the return to service of the MAX, Boeing is placing itself in a failure situation. Next January, Boeing’s credibility with its customers will be pretty bad. The first quarter of 2020 will be critical for Southwest; after more than a year waiting for its MAX, the carrier will have to turn to other solutions. If it had to opt for the A220, the blow would be very hard for Boeing. But the manufacturer would have only himself to blame.
>>> Follow us on Facebook and Twitter
