The crisis facing Boeing is impacting the entire aviation industry.
Boeing, known for its high fuel efficiency jet aircraft, still has a strong demand in the market. However, following the &#34;cabin door detachment at high altitude&#34; incident in early January, Boeing is facing regulatory and criminal investigations. The Federal Aviation Administration has set production limits on Boeing's best-selling 737 Max model to ensure safety and prevent further accidents, leading to a reduction in aircraft deliveries by Boeing.
This crisis is affecting the entire aviation industry. Many airlines, including Southwest Airlines and Alaska Air, are experiencing capacity shortages due to delayed Boeing aircraft deliveries, further impacting their financial and stock performance. Southwest Airlines saw its largest drop since the pandemic, while Alaska Air reported a $150 million decrease in profits.
Southwest Airlines, a Boeing customer, plans to reduce flight numbers this year, suspend most recruitments, and reassess its financial budget and expenditure plans to cope with the uncertain future. Due to issues such as reduced capacity and increased costs, the company expects a net loss this quarter. In their regulatory filing on Tuesday, they stated:
&#34;Due to slowing growth, the company is reassessing its full-year performance guidance.&#34;
&#34;As part of cost control, the company has halted recruitment for several workgroups, including pilots and flight attendants, with the total number of employees expected to be lower than in 2023 by the end of the year.&#34;
As of Monday's close, the company's stock has risen by 17% year-to-date, but negative financial outlook and Boeing's issues continue to weigh on the stock. Overnight, Southwest Airlines' stock fell by over 14%, marking the largest single-day drop since June 2020.
Due to the unstable Boeing delivery schedule, Southwest Airlines expects not to receive any 737 Max 7 aircraft this year, with deliveries of other models reduced to 46 aircraft from the previous expectation of 79. Therefore, the company will face more capacity constraints, requiring adjustments to routes and flight schedules in the second half of this year, with capacity expected to decrease by at least one percentage point in 2024 compared to 2023.
Alaska Air reported a $150 million decrease in profits.
The issues with Boeing not only affect Southwest Airlines but also impact other airlines.
On Tuesday, March 12th, Alaska Air, the airline involved in the &#34;cabin door detachment at high altitude&#34; incident, stated:
&#34;After the accident in early January, all 737 Max 9 aircraft were globally grounded, leading to a $150 million decrease in the company's profits.&#34;
&#34;Due to the uncertainty in Boeing's aircraft delivery volume, the company's capacity remains unstable. Alaska Air has received partial compensation from Boeing, which will be reflected in the company's adjusted loss per share expectations.&#34;
<h2>United Airlines shifts towards Boeing's competitor Airbus</h2>
According to reports, United Airlines has informed Boeing not to build any more 737 Max 10 aircraft for them and is considering converting a portion of its 277 737 Max 10 orders to Airbus' A321 aircraft until Boeing can successfully pass its long-delayed certification.
United Airlines CEO Scott Kirby stated that Boeing has agreed to modify the order for the airline to produce Max 9s aircraft instead, but it is currently difficult to predict when the 737 Max 10 will be certified. Once certified, United Airlines will reconsider the Max 10.
Analysts point out that this could provide Airbus with a significant opportunity to take market share from its main competitor Boeing, as Boeing's predicament may give Airbus a chance to dominate the aviation sector.
<h2>Optimistic first-quarter financial outlook for the U.S. aviation industry: Seeking stability amid fluctuations</h2>
Major U.S. airlines face varying challenges in the first quarter of 2024 but also show some positive signs, such as improved revenue growth expectations and enhanced cost control.
According to reports, Southwest Airlines expects unit revenue (revenue per seat mile) to remain flat or grow by 2% this quarter, a slight adjustment from the previous highest forecast of 4.5% growth, mainly due to lower-than-expected leisure passenger numbers. However, the company's capacity in the first quarter is expected to grow by 11%, higher than the previous planned 10%. Additionally, unit costs are expected to increase by 6%, a slight decrease from the previous highest forecast of 7% growth. It is worth noting that Southwest Airlines stated that second-quarter bookings are better than normal levels.
It is noteworthy that the 11% capacity growth forecast for Southwest Airlines refers to the first quarter of 2024 compared to the previous plan. The earlier mentioned 1 percentage point capacity decline refers to the company's change in the second half of 2024 compared to the full year of 2023.
According to documents submitted to regulatory agencies on Tuesday, American Airlines Group expects to incur a loss in the first quarter, but the loss is expected to be at the lower end of the previously forecasted range of a loss of 15 cents to 35 cents per share.
Delta Air Lines stated that it expects total revenue growth in the first quarter to be in the upper half of its performance guidance range.
JetBlue Airways anticipates a year-on-year decline of up to 7.5% in first-quarter revenue, an improvement from the previously forecasted maximum decline of 9%. Non-fuel unit costs are expected to increase by up to 9.5%, lower than the previously guided maximum increase of 11%. At the same time, capacity is expected to decrease by 3% to 4%, below the previous expectation of a maximum decline of 6%.
Furthermore, data released by the U.S. government on Tuesday showed that airfare prices in February rose by 3.6% compared to the previous month, marking the largest monthly increase since May 2022. This reflects both the challenges faced by the industry and positive signs of development.

DFEN

The crisis facing Boeing, especially the production restrictions and safety investigations of the 737 Max aircraft, is having a significant impact on the entire aviation industry. This has not only led to a reduction in Boeing's aircraft deliveries but also had negative effects on the operations and financial conditions of many airlines.

Wallstreetcn

Direxion Aerospace & Def Bull 3X

Southwest Airlines

Boeing

The Boeing incident triggered a chain reaction in the U.S. aviation industry, leading to Southwest Airlines experiencing its largest drop since the outbreak of the pandemic.