Dive Brief:
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United Airlines is carrying the costs of Boeing 737 MAX's grounding and the resultant supply chain inefficiencies, CFO Gerry Laderman told The Wall Street Journal this week.
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United's operating costs have increased by double-digits, the Journal said, because of the indefinite grounding of the 737 aircraft. Regulators grounded the aircraft in March following two fatal crashes that claimed over 300 lives.
- Boeing's groundings have caused a substantial ripple effect in the airline space. In April, Supply Chain Dive reported Boeing delivered 50 fewer 737 MAX planes to airlines than planned.
Dive Insight:
The grounding has resulted in thousands of canceled flights and the loss of millions of dollars in revenue for the airlines. Because the Federal Aviation Administration (FAA) has yet to set a date for lifting its ban on the aircraft, internal financial planning remains uncertain.
United anticipates canceling "75 flights a day" next month, adding up to about 2,300 cancellations before the new year, WSJ said. The jets flying in place of the 737 MAX are "more expensive to operate in terms of fuel and maintenance costs," Laderman told WSJ.
For its part, Boeing has named an initial compensation estimate of $6.1 billion for its customers, according to WSJ. Boeing cites an ongoing trade war with China as reason for the overall operational slowdown, which includes a rate of 42 new planes manufactured a month, down from 52, Supply Chain Dive reported.
United is preparing a publicity campaign to rebuild confidence in the aircraft, Laderman told WSJ. He expressed confidence that shareholders and passengers will be willing to re-board as soon as the planes are available.
