A gaping hole where the paneled-over door had been at the fuselage plug area of Alaska Airlines Flight 1282, on Jan. 7.The Associated Press
After a door panel on an Alaska Airlines-operated Boeing 737 Max 9 jet blew off mid-air in January, Anneke Palmerton learned the carrier had cancelled her flight to Orlando as well.
It did not surprise her as Alaska had decided to ground its fleet of Max 9 aircraft after the Jan. 5 accident. Little did she know the incident would snowball, affecting air service in her city of Bellingham, Wash., and upending her winter plans to fly Southwest Airlines.
The door blowout happened aboard only one flight. But fallout from the ensuing safety crisis has inflated costs for those reliant on Boeing Co. BA-N.
Interviews with airline executives, union leaders, pilots, suppliers, passengers and government officials show how the incident is rippling through the trillion-dollar global aviation industry.
Boeing’s resulting slump in Max deliveries has hit earnings at airlines such as Southwest and some suppliers who planned to equip new planes. It has inconvenienced and stranded passengers as airlines fly fewer routes, and has led to a slowdown in pilot hiring, interviews show.
“We thought … there would be a little bit of bumps,” said Ms. Palmerton, a notary and marriage officiant in Bellingham. “Never in a million years [did we think] it would lead to Southwest,” Ms. Palmerton said about the airline’s decision to cut service to her local airport.
Boeing is the largest U.S. exporter and employs nearly 150,000 people domestically. It supports millions more through a supply chain that includes thousands of businesses big and small around the world.
Economist Joseph Brusuelas estimates it cumulatively contributes US$1-trillion a year to the U.S. economy and supports more than five million jobs.
Boeing referred to executive comments made earlier that described the situation as difficult, but noted company efforts to improve quality are paying off with improved factory operations. Boeing expects to get back to a Max production rate of 38 a month in the back half of the year.
Under pressure from regulators, Boeing has pledged to prioritize safety over speed, which has slowed down its jet production. It delivered 175 jets in the first half of 2024, down 34 per cent from a year ago and 46 per cent fewer than its European rival Airbus handed over to customers.
Ramp-up delays have some suppliers waiting to benefit from their investments. Montreal-area component supplier Meloche Group Inc. invested $10-million this year to support higher demand, including that of the LEAP engines that power Max planes.
But GE Aerospace and its partner France’s Safran have previously said they are slowing down LEAP production this year, citing Boeing’s crisis.
Meloche now expects to miss its $150-million revenue target this year by 5 per cent, although chief executive officer Hugue Meloche said sales should rise 25 per cent in 2025. The Jan. 5 incident adds headaches for airlines already battling engine delays on some Airbus A320 jets and industry-wide supply chain bottlenecks.
Airlines prepare months in advance before putting a new aircraft in service. They hire and train pilots, and plan their network, incurring significant preparation and infrastructure costs. The aircraft delivery delays mean they can’t recover those costs.
While the full financial impact of Boeing’s crisis is difficult to quantify, it is taking a toll on airline earnings and jobs. U.S. budget carrier Allegiant Air, a Boeing customer, has said that delays in aircraft deliveries are costing it about US$30-million a year. United Airlines Inc. UAL-Q, another customer, has slashed its hiring plans for the year by almost 30 per cent, citing fewer aircraft deliveries. Rival American Airlines Group Inc. AAL-Q has also dialled down its hiring plans.
“We have seen some Boeing delivery delays,” American’s chief financial officer Devon May told Reuters in April. “So, we’re probably not going to be hiring as many people as we would have expected back in January.”
The situation is more dire at Southwest Airlines Co. LUV-N – which operates an all-Boeing fleet and is now facing the prospect of a proxy fight, in part because of jet delivery delays. The company had been hiring staff on an assumption it would receive 85 jets this year, but it now expects only 20 planes. A lack of aircraft has hit its revenue and worsened cost pressures as the carrier spends millions of dollars to keep flying older planes. It is also estimated to have left the airline with about 800 excess pilots.
With its earnings under pressure, Southwest has decided to concentrate on more profitable markets and exit Bellingham and three other airports. It has already stopped hiring pilots and suspended training for new hires and drawn up plans to offer its pilots reduced hours and effectively lower pay.
That’s a dramatic reversal in fortune for its pilots, who barely six months back were so much in demand at rival carriers that the company was struggling to stabilize the attrition rate.
In Bellingham, Southwest accounts for about 40 per cent of passenger traffic. Its arrival in late 2021 helped the small city airport compete as a lower-fare alternative to Canada’s Vancouver International Airport, which had almost 25 million arriving and departing passengers last year. Travellers from Canada accounted for more than half of Bellingham’s estimated passenger traffic of more than 630,000 last year.
City officials see an economic impact once Southwest stops operating in the city in August. “It’d definitely be felt in our communities,” said Kip Turner, director of aviation at Bellingham International Airport.
Since the Jan. 5 incident, Boeing has abruptly announced sweeping management changes that included the departure of CEO Dave Calhoun at the end of the year. The plane maker has increased inspections at its own and suppliers’ facilities, expanded training for new hires, and instructed managers to spend more time on the factory floor.
Industry executives say while they are encouraged by Boeing’s action plan, they need results.
“We are wanting to ensure that they produce the highest-quality aircraft, that we can confidently fly safely every single day,” said Alaska Airlines CFO Shane Tackett.