HomeMost PopularStrategies of Airlines in the Wake of Boeing's Woes

Strategies of Airlines in the Wake of Boeing’s Woes

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By Roger Lowenstein

New York, March 14 (Reuters) – As the safety scandal engulfs Boeing BA.N, airlines are grappling with the repercussions. In a market dominated by two aircraft manufacturers, carriers are left with few alternatives but to navigate the tumultuous terrain with the U.S. aerospace giant.

Navigating Troubled Skies

Amid public displays of concern and high-level meetings, airlines are caught in a bind. United Airlines’ CEO Scott Kirby’s recent visit to Airbus in France in the wake of Boeing’s latest crisis underscores the industry’s dilemma. However, negotiations for new plane orders persist as carriers seek to capitalize on Boeing’s vulnerabilities for favorable terms.

The aftermath of the mid-flight cabin blowout on January 5 has severely derailed Boeing’s delivery schedule, underscoring shortcomings in safety protocols. Yet, the backlog at rival Airbus renders switching manufacturers unfeasible for airlines, leaving them to strategize on how to maintain fruitful relations with Boeing.

Leveraging Adversity

Airlines are employing various tactics to weather the storm with Boeing, such as utilizing placeholder orders and leveraging delays to secure discounts and compensation. Despite the challenges, industry experts like Scott Hamilton foresee limited options for Boeing’s clientele, forcing them to stand by the manufacturer in these turbulent times.

United’s strategic shift towards Airbus A321neo planes amid uncertainties surrounding the MAX series exemplifies airlines’ efforts to hedge their positions. However, with Airbus’ order book full for nearly a decade, a sense of realism is settling in within United, prompting them to explore diverse solutions for their aircraft needs.

Forced Partnerships

American Airlines’ recent foray into ordering MAX 10 jets serves as a response to Boeing’s ongoing quality issues and delivery delays that have disrupted their operations. In a bid to ensure flexibility, the carrier secured options to convert orders to different models and obtain compensation for delays, signaling a delicate balancing act between loyalty and pragmatism.

Meanwhile, Southwest Airlines, deeply entrenched in a Boeing-centric business model, faces significant logistical and financial hurdles should they consider transitioning to another manufacturer. Despite Airbus’ overtures, Southwest remains committed to Boeing, emphasizing the symbiotic relationship between the airline and the embattled planemaker.

Bob Jordan’s stance at the JP Morgan industrial conference highlights the sentiment prevalent among Boeing’s key customers, echoing the belief that a resilient Boeing is pivotal for the long-term health and stability of the aviation industry.

(Reporting by Rajesh Kumar Singh; Editing by David Gaffen and Bill Berkrot)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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