The state of play:
Boeing has 4,172 737 MAX aircraft on order as of June 30th 2020
Boeing recognises that 1,000 are potentially at risk of cancellation and admits that 600 of those are almost certainly lost.
Boeing uses a formula to work out if airlines can actually afford the aircraft or will survive long enough to take delivery, (called ASC-606 Revenue Recognition) – and 600 firm orders basically fall into the “not likely” category.
US airlines are responsible for 13.2% of all orders, so around 567 aircraft.
U.S. carriers Alaska Airlines, American Airlines, Southwest Airlines and United Airlines are all customers.
Southwest had 34 MAX when grounded in March 2019. The airline’s hoping to have those 34 up and running by December, but isn’t especially concerned if things move into the first months of 2021.
The advice to the airline is that it will take up to 9 to 10 weeks to train all of its pilots, and if the FAA agree with Boeing that they’re happy with the new training plans, it might be possible to train them during September to October.
Southwest has 264 MAX on order and it hasn’t made any plans to cancel them. The airline is entirely 737 based, and still has 60 737-800’s grounded. These give it flexibility to wait out the MAX return to service if needed. Its laso handed back its 737-700s to lessors.
However the airline isn’t willing to accept more than 48 MAX by the end of 2021, and may hold that number lower if the market doesn’t return to make them viable. Southwest has said it has no intention of cancelling any of the agreement, even if it postpones delivery.
United had 14 MAX-9’s at the point they were grounded in March 2019. It’s already agreed back in June with Boeing to re-schedule its deliveries. United is only taking 40 of its 131 aircraft on order during 2021, but won’t take any at all in 2022. United have said they have no intention of taking aircraft they don’t need until they’re ready for them. they also haven’t cancelled any and so far don’t plan to.
American had 24 grounded back in March 2019, there are another 76 on order.
Hard negotiations are under way with Boeing and the airline wants all of its aircraft on finance so it doesn’t have to pay for them in hard cash.
17 MAX were destined to be delivered this year, which seems unlikely. They also are scheduled to take 36 by 2023 and then 40 more from 2025. Frankly all of this subject to the outcome of the re-negotiated financing.
Alaska has 32 MAX on order, with three due in 2020 that should have been delivered in 2019. These 3 are part of the 450 sat on the ground in various parking facilities around the US.
Alaska inherited a tranche of A320 family aircraft from Virgin America, and its been reluctantly impressed by the aircraft, having always been a 737 customer. While its evaluating wether to keep/re-lease or replace with more A320’s is a decision that’s still pending.
The airlines CEO said he was satisfied with the MAX’s safety, and there’s still strong loyalty to the 737.
Outside of the US analysts worry…
Surprisingly the US market isn’t looking at any cancellations – yet.
Analysts however are saying that as many as 400 more aircraft fall into Boeing’s ASC-606 Revenue Recognition equations,.
Boeing is also seeming to head towards a production rate of around 11 a month – which is staggeringly low when you think back to the 63 a month in 2019.
Strictly speaking, Boeing should reach around 47 a month – of all 737 types – by 2023, with a peak of 63 a month later that year, probably dropping back in 2024.