A United Airlines passenger jet taxis at Newark Liberty International Airport, on Dec. 6, 2019.CHRIS HELGREN/Reuters
United Airlines Inc. UAL-Q raised questions over the fate of billions of dollars of 737 Max 10 jets on order from Boeing Co. BA-N, piling pressure on the plane maker as it struggles to prevent the grounding of a smaller model further upsetting confidence.
United Airlines chief executive Scott Kirby on Tuesday said the airline, which says it has ordered 277 of the Max 10 jets with options for another 200, would build a new fleet plan that does not include a model already mired in regulatory and delivery delays.
U.S. regulators have grounded most of Boeing’s Max 9 jets for checks after a plug replacing an unused exit door tore off an Alaska Airlines jet on Jan. 5, forcing an emergency landing.
Industry watchers have been looking for concrete signs that Boeing’s woes with the Max 9 and the legacy of earlier Max safety groundings are undermining support for the larger Max 10, which makes up more than a fifth of outstanding Max orders.
“I think the Max 9 grounding is probably the straw that broke the camel’s back for us,” Mr. Kirby said in an interview with CNBC’s Squawk Box on Tuesday.
Boeing shares fell almost 1 per cent.
The Max 10 does not have the same kind of door-plug system as the Max 9, but the grounding has raised concerns that the incident could delay regulatory approval and delivery of the Max 10, as well as temper broader plans for higher production.
After disappointing Max 9 sales, Boeing is betting on its newest proposal, the larger-capacity Max 10, to dent the runaway lead of Airbus’s A321neo at the busiest end of the market.
Analysts say a full rollout of the Max lineup is crucial to help Boeing stabilize its roughly 40-per-cent share against Airbus and generate enough cash to comfortably ride out the coming decade.
In the best-case scenario, Max 10 deliveries are five years behind their original delivery date, Mr. Kirby estimated.
He later said United would not cancel the jets, just remove them from internal plans. Industry experts say airlines rarely cancel orders for fear of losing deposits, but often juggle models or else use public pressure to help win concessions.
In a statement after Mr. Kirby’s comments, Boeing Commercial Airplanes CEO Stan Deal said: “We have let down our airline customers and are deeply sorry for the significant disruption to them, their employees and their passengers.”
Analysts say United has already effectively suspended a long-standing order for Airbus A350s by repeatedly deferring it. United reiterated it was looking at the 2030s time frame.
While Mr. Kirby’s remarks left unresolved questions hanging over the Max 10 orders, industry sources said the airline also faces a dilemma as it races alongside rivals to meet rising demand.
Airbus is sold-out for similar planes until around 2030.
“It is not helpful for the Max 10 when United, holding orders for 26 per cent of the entire known Max 10 backlog, says this,” said Rob Morris, head of global consultancy at Ascend by Cirium.
“But what will United do instead?”
Airbus declined to comment.
The furor over the latest version of Boeing’s vintage cash cow, the 737, has put Boeing’s management led by David Calhoun under the spotlight, with some commentators calling for changes and some airline executives privately calling for a reset.
But the CEO of Boeing’s largest engine maker GE Aerospace, Larry Culp, threw his weight behind Boeing’s leadership.
“They’re an important customer. They’re an important partner,” Mr. Culp told Reuters. “Dave and I are in frequent communications on a whole range of issues.”
When asked if he had confidence in the ability of Boeing’s leadership to fix its problems, Mr. Culp said: “I have confidence.”
In stark contrast with an earlier safety crisis, when it was criticized for a wooden and legalist response to crashes that killed a total of 346 people, Boeing has acknowledged mistakes and ordered an outside study of quality controls.
Mr. Kirby’s public comments come after people familiar with the matter told Reuters this month United had become “incensed” with a supplier with which it shares corporate roots. It has been forced to ground 79 Max 9 jets for which it had sold seats.
United on Monday warned of a hit to its first quarter.