According to the source familiar with the matter, American Airlines, Inc. is threatening Boeing that it may cancel some overdue orders for the 737 Max unless the American multinational corporation helps to line up new financing for the jets.
The airlines took the stand as all airlines are experiencing financing increasingly expensive and difficult as the COVID-19 pandemic paralyze their operations. Before ground in March 2019, American Airlines had twenty-four Max jets.
American Airlines is warning Boeing that it could cancel some overdue orders for the grounded 737 Max unless the plane maker helps line up new financing for the jets. https://t.co/8Ck2OjMwZu
— The Seattle Times (@seattletimes) July 11, 2020
According to three familiar people, previously, it orders seventy-six more jets, but now it wants Boeing to help arrange to finance for seventeen planes for which earlier financing has or will soon expire.
One of the people further explains that if the companies can’t reach on any accord, the airlines may use Max financing that is near to expire to pay for jets from archival Airbus of Boeing. Boeing states that it is working with customers during the difficult time of the industry as all airlines meet a steep fall in traffic, but didn’t comment on the talks with American Airlines.
The Wall Street Journal initially reported the news of American Airline’s threat to cancel Max’s orders. The situation highlights the stress facing airlines during the COVID-19 pandemic. It creates more difficulty and expensiveness for them to finance jets. The negotiating stance of Americans doesn’t indicate a loss of confidence in the safety of the planes.
Boeing crashes in Indonesia and Ethiopia
Before the crashes of Boeing in Indonesia and Ethiopia, killing 346 people, Max was the best-selling plane of Boeing. After the accidents, the authorities ground all Max jets across the world. The COVID-19 pandemic compounded the problems of Boeing by causing a notable fall in air travel and a loss of interest in new aircraft. According to the aviation data supplier Cirium, almost forty percent of the world’s passenger planes are idle because of the current situation.
It made it tougher to finance jets. Southwest Airlines and United Airlines found foreign investors who settled in April and May to acquire Max jets and lease them to the airlines. However, those carriers are in stronger financial conditions than American Airlines. The seventeen jets in dispute supposed to delivered to American Airlines about one year ago. It gave the airline the choice of canceling the order without consequences and recovering its down payments now.
The deliveries of planes delayed, on the other side, Boeing works to fix a flight-control system supposed to play a significant role in the crashes. Several airlines canceled orders for over four hundred jets thus far this year. Therefore, Boeing A320 is no longer sure enough to count in the backlog of Boeing. Airlines dropped some of them because of financial problems, whereas others swapped for various Boeing planes. Boeing took around 4,619 orders through May 2020.
Air travel fell 95% in the U.S.
Air Travel in the United States dropped around ninety-five percent from the start of March until mid-April. Since then, traffic recovered slightly but remained down over seventy percent from the previous year. With small revenue coming in, worldwide airlines are cutting spending and preparing to furlough a huge number of employees this fall.
American Airlines accepted around $5.8 billion in federal relief program to pay the salaries of the employees through 30th September, reached uncertain agreement on a federal loan of $4.75 billion, and aligned billions more in available cash from private financiers to survive the downturn of travel.