Show an ad over header. AMP

Boeing's dual crises: How the pandemic has deepened its 737 MAX crunch

The grounding of Boeing’s 737 MAX was the worst crisis in the plane-maker’s century-long history. At least until the global pandemic hit.

Why it matters: Wall Street expects it will be cleared to fly again before year-end. Orders for what was once the company’s biggest moneymaker were expected to rebound after the ungrounding, but now the unprecedented slump in travel will dash airlines’ appetite for the MAX and any other new planes, analysts say — putting more pressure on the hard-hit company.

Driving the news: The two 737 MAX crashes in Indonesia and Ethiopia that killed 346 people — and led to its worldwide grounding in March of last year — were front and center this week.

  • Congress released a 238-page report outlining the “horrific culmination” of events that caused the crashes — laying blame on Boeing and its key regulator, the FAA.
  • The report isn’t expected to delay the plane’s return to service, as Fitch Ratings wrote in a report out this week.
  • Boeing has conducted test flights in recent months to demonstrate the beleaguered jet is safe to fly. The FAA's OK that the plane can return to the skies would likely prompt other countries to follow suit.

The state of play: The company has over 450 737 MAX jets in the hopper to be delivered, with a total of 4,117 planes ordered by airlines as of late last month, according to Fitch.

  • But order cancellations are piling up. The pandemic has introduced a new reality — scrapped orders have consistently outpaced new orders.
  • While Boeing is expecting some windfall when they're cleared to restart deliveries, as customers pay a healthy chunk when they place the order, the majority of payment comes upon delivery.
  • And even if customers don't outright cancel prior 737 MAX orders, airlines will "negotiate really hard to defer those deliveries" — pushing off payment to Boeing, says Cai von Rumohr, a Cowen analyst who's followed the industry for 50 years.

The big picture: Airlines are facing such a severe drop-off in travel demand that previous needs for additional planes have disappeared. Even their current inventory isn’t fully utilized.

  • Air New Zealand said this week it would store its entire Boeing 777 fleet until September of next year because of the pandemic. Delta has announced a similar measure.
  • That’s bad news for Boeing, “which makes a long list of spare and replacement parts and components and sells them to airlines to keep the big airplanes in the air,” as the Puget Sound Business Journal reports.

Between the lines: Some deliveries of the 787 Dreamliner — its other popular plane — have slowed after the company disclosed manufacturing issues and was forced to conduct inspections, the New York Times reported earlier this month.

  • Even with those troubles aside, demand for that plane is expected to wane.
  • "787 customers don't need to have more 787 planes. International travel is still down by 90%," von Rumohr tells Axios.

The bottom line: When the 737 MAX was grounded, there were questions about whether customers would ever feel safe flying on the plane again. The question has morphed into: How long will it be before customers fly again, period.

  • Boeing will weather the crisis. It withdrew its plea for federal funds, but loaded up on debt and raised billions in the public market after the Federal Reserve stepped in to shore up credit markets early in the crisis.

Tim Kaine, Susan Collins pitch Senate colleagues on censuring Donald Trump

Sens. Tim Kaine and Susan Collins are privately pitching their colleagues on a bipartisan resolution censuring former President Trump, three sources familiar with the discussions tell Axios.

Why it matters: Senators are looking for a way to condemn Trump on-the-record as it becomes increasingly unlikely Democrats will obtain the 17 Republican votes needed to gain a conviction in his second impeachment.

Keep reading... Show less

Anthony Coley to lead Justice Department public affairs

Judge Merrick Garland, President Biden’s nominee for attorney general, has tapped Anthony Coley, an Obama-era Treasury Department official, to serve as a senior adviser and lead public affairs at the Department of Justice, according to people familiar with the matter.

Why it matters: As the public face of the DOJ, Coley will help explain — and defend — the department's actions, from sensitive cases to prosecutorial decisions, including the investigation into Hunter Biden.

Keep reading... Show less

AP: Justice Dept. rescinds "zero tolerance" policy

President Biden's acting Attorney General Monty Wilkinson issued a memo on Tuesday to revoke the Trump administration's "zero tolerance" immigration policy, which separated thousands of migrant children from their families at the U.S.-Mexico border, AP first reported.

Driving the news: A recent report by Justice Department Inspector General Michael Horowitz emphasized the internal chaos at the agency over the implementation of the policy, which resulted in 545 parents separated from their children as of October 2020.

Keep reading... Show less

Biden makes a down payment on racial equity with a series of executive orders

President Biden is making a down payment on racial equity in a series of executive orders dealing with everything from private prisons to housing discrimination, treatment of Asian Americans and relations with indigenous tribes.

The big picture: Police reform and voting rights legislation will take time to pass in Congress. But with the stroke of his pen, one week into the job Biden is taking steps within his power as he seeks to change the tone on racial justice from former President Trump.

Keep reading... Show less

Most Senate Republicans join Rand Paul effort to dismiss Trump's 2nd impeachment trial

Forty-five Senate Republicans, including Minority Leader Mitch McConnell, joined Sen. Rand Paul (R-Ky.) on Tuesday in an effort to dismiss former President Trump's second impeachment trial.

Why it matters: The vote serves as a precursor to how senators will approach next month's impeachment trial. The House impeached Trump for a second time for "incitement of insurrection" following events from Jan 6. when a pro-Trump mob stormed the Capitol.

Keep reading... Show less

Texas judge temporarily halts Biden's 100-day deportation freeze

A federal judge in Texas has temporarily blocked the Biden administration's 100-day freeze on deporting unauthorized immigrants.

Why it matters: Biden has set an ambitious immigration agenda, but could face pushback from the courts.

Keep reading... Show less

Reddit is running Wall Street

Wall Street is locked in a battle of will between professional investors who live in Greenwich and amateur investors who congregate on Reddit. So far, the amateurs are winning, judging by increases in their chosen stocks, like GameStop and Bed, Bath & Beyond.

Axios Re:Cap goes deeper into what's really happening, the mechanics of stock "shorting" and what it means for the markets' future, with Axios chief financial correspondent Felix Salmon.

Biden holds first phone call with Putin, raises Navalny arrest

President Biden on Tuesday held his first call since taking office with Vladimir Putin, pressing the Russian president on the arrest of opposition leader Alexey Navalny and the Russia-linked hack on U.S. government agencies, AP reports.

The state of play: Biden also planned to raise arms control, bounties allegedly placed on U.S. troops in Afghanistan and the war in Ukraine, according to White House press secretary Jen Psaki, who said the call took place while she was delivering a press briefing. Psaki added that a full readout will be provided later Tuesday.

Keep reading... Show less



Get Goodhumans in your inbox

Most Read

More Stories