Boeing Takes Another One-Two Punch: Virus Travel Slowdown And Stock Market Correction

In just the last week Boeing suffered the unwelcome double-whammy of a weakening outlook for airlines brought on by travelers’ fears of coronavirus coupled with falling financial markets. This in turn tests airlines’ resolve to keep their 387 737 MAXs that have been grounded, as well as their ability to absorb the approximately 400 other 737 MAX aircraft that Boeing built but hasn’t delivered that are collecting dust pending regulators’ approval to fly again.

Travel advisories from government, corporate travel restrictions, cancelled meetings and conferences and postponed personal travel can’t be good for the airlines, and it’s not. United just withdrew its financial guidance, and others won’t be far behind in breaking their news of expected, compromised financial performance.

At the same time, stock markets around the world went into correction territory. As individuals see their paper profits dwindle and companies brace for the unknown, it’s inevitable that travel will only be further crimped as flyers skip discretionary trips or take a pass on lucrative seat upgrades until they feel rich again.

All of this further impacts airlines. Those that were performing marginally or losing money may disappear in the coming months, along with the Boeing 737 MAX orders they may have had. Even airlines with financial wherewithal will feel compelled to at least explore canceling or postponing route and fleet expansion plans. This would either open the opportunity to further pressure Boeing into even more concessions in exchange for keeping their 737 MAXs or dump them back into a market of dwindling buyers.

This ultimately raises the prospect that Boeing may reconsider when to resume production of the 737 MAX. While most recently estimated to begin in March or April this year, that goal post could be moved further out to keep the unplaced fleet from getting any bigger. This delay would further exacerbate an already tortured Boeing supply chain.

It’s postulated that the 737 MAX parked inventory will already take upwards of two years to assimilate into the world airline fleet. Last week just made that a best-case scenario.

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