The financiers behind the world’s airline industry are meeting for the first time since a mid-air cabin blowout pushed Boeing BA.N into a new safety crisis, compounding a shortage of airplanes as regulators stepped up factory inspections.
Lessors, bankers and airlines meeting in Dublin – home to a booming global air finance sector – are examining the supply consequences of a recent partial grounding of the Boeing 737 MAX 9, following the Alaska Airlines incident earlier in January.
For months, aviation has been struggling to keep pace with a post-pandemic travel boom amid labour and parts shortages.
But widespread outrage over the near-disaster that led to an emergency landing with a gap in the side of an aircraft, but no major injuries, has added a new layer of regulatory risk.
“Demand is more or less a slam dunk; the question is when does the supply catch up?” Rob Morris, head of global consultancy at Ascend by Cirium, told Reuters ahead of the week-long Airline Economics conference starting on Monday.
“We have estimated 2026 or 2027, but there must be a risk on the downside now because of the MAX.”
The Federal Aviation Administration last week took the unusual step of ordering Boeing to stop increasing 737 MAX production until quality control concerns were addressed.
It has given no indication how long the limit may last. But when it is lifted, industry experts say regulators are expected to maintain extra checks that may curtail predictions for production.
While a previous safety crisis over fatal MAX crashes in 2018 and 2019 prompted regulators to tighten control of aircraft design and development, the blowout and subsequent discoveries of loose bolts elsewhere in the fleet could weigh on production.
That, analysts say, means the two crises will respectively make airplanes harder to develop and slower to produce.
The clampdown comes on top of widespread snags in the supply chain since the pandemic.
“We have tremendous OEM (manufacturer) challenges whether at airframe or engine level, or sub-components like seats and galleys,” Steven Udvar-Hazy, executive chairman of Air Lease Corp AL.N, told the Airline Economics conference.
That’s potentially good news for leasing companies that have already placed big plane orders and will now secure a bigger return on their investments as airlines rush to lease planes.
But for airlines it could means a gap in receiving new technology needed to lower costs and reduce emissions, as well as higher lease rates. That in turn could lead to higher fares.
After Boeing faced a barrage of criticism from regulators and politicians, the Dublin conference will provide a new test of confidence in the planemaker among the owners representing more than half of the world’s airliner fleet.
Several industry commentators, including influential analyst Richard Aboulafia, have called on Boeing CEO Dave Calhoun or other executives and board members to step aside.
Boeing has declined to comment directly on such remarks.
Aviation is a close-knit industry with few suppliers and long memories so explicit attacks on serving managements tend to be rare – at least in public.
But investors will pay close attention to the tone of interventions by the heads of top leasing companies like AerCap AER.N, SMBC Aviation Capital, Air Lease AL.N and Avolon at the industry’s major annual conference, delegates said.
Calhoun has pledged that Boeing will acknowledge errors and ensure that an accident like the Alaska Airlines blowout “can never happen again.”
(Reuters)