On the same day that Boeing announced that it lost another 108 orders for its 737 Max aircraft, its CEO made a startling prediction about the airline industry.
Today’s announcement adds to a steady flow of canceled orders for the 737 Max. The model has been grounded for the last 14 months following two fatal crashes. The said crashes took 346 lives in late 2018 and early 2019. Year-to-date, Boeing has lost a little more than 500 orders for the 747 Max. Additionally, the company hasn’t added a single new order in months.
Boeing says the backlog for the plane has slipped to 4,834, down from 5,049 orders just last month. That’s the smallest backlog since 2013 as the travel industry grapples with the ongoing coronavirus pandemic.
Air passenger traffic has plunged 90% compared to last year. This took place as the shelter-in-place orders and work-from-home directives have sapped the demand for air travel.
Dave Calhoun, Boeing’s CEO, says he expects it could take 3 years to see demand recover to pre-coronavirus levels. He also says the company needs two more years to get the industry back on the growth track it was on before the lockdowns took effect.
Last week, he appeared on Fox Business’ “Mornings with Maria” and said he expects air travel to only rebound to 50% by the end of the year.
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“If I survey all of our customers and I start here in the U.S., and of course we do … most are trying to dial in a return of about 30 [percent] to 50 percent by the end of this year,” adding, “A lot’s going to depend on how the public responds to the safety of airline cabins, etc.”
During an appearance on the “Today Show” yesterday, Calhoun even went as far as predicting that a major US airline will go out of business before Halloween.
“I don’t want to get too predictive on that subject. But yes, most likely,” Calhoun said. “Something will happen when September comes around,” he added. (When asked for a comment, a Boeing spokesman said Calhoun “was speaking in general about the uncertainty in the sector not about any one particular airline.”)
September is when the payroll support program under the CARES Act ends. This program set aside $25 billion in grants and loans for U.S. airlines. Roughly 90 percent of the allocated money is expected to go to the US’s five largest airlines – American, United, Delta, JetBlue, and Southwest.
Calhoun believes that airline passenger levels will still only “be back to 25 percent” by September. He said, “There will definitely be adjustments that have to be made on the part of the airline.”
It appears most airline analysts are a little more upbeat about the industry’s prospects for recovery than Calhoun. Helane Becker, an analyst at Cowen, said the 52% of respondents to the firm’s survey expect a U-shaped recovery for the industry. Becker is also just 12% expecting a recovery in more than 4 years.
Shares of the major airlines dropped after Calhoun’s comments. It happened as American Airlines Group Inc. fell by 4.46%, Delta Air Lines declined 4.41%, United Airlines fell 5.05%, and Southwest Airlines fell 3.3%. JetBlue Airways losing 5.84% and Spirit Airlines dropping by 7.36% also added to the cause.
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