United Airlines cancels 737 MAX flights until summer

United, which had 14 Boeing MAXes in operation when aviation regulators issued their no-fly order in March, said the decision will result in 13,820 flight cancellations between December and early June. 

Airlines have tried to minimize the impact of the grounding on customers by using spare aircraft, swapping in larger aircraft and rebooking passengers, but the effort has been costly. Older planes are less fuel efficient than the MAX, idle planes have to undergo extra maintenance checks before returning to service and airlines looking to expand have had to forego revenue from new flights to be operated by the 737 MAX. 

Executives said during the company’s third-quarter earnings call that United planned to substitute larger planes, including the MAX, on many domestic routes in 2020 to help drive down operating costs and improve efficiency. United is scheduled to receive 28 more 737 MAXes next year.

Boeing has set aside $5 billion to help compensate airline customers for damages. Southwest Airlines recently said it agreed on a partial settlement with Boeing for an undisclosed amount and will share $125 million of the payment with employees.

Boeing Co. is the largest U.S. exporter of manufactured goods and supports thousands of jobs internally and among its far-flung supply base. Some economists have predicted the production halt could slice 0.5% off the nation’s GDP next year, depending on how long it lasts. 

More than 50% of Spirit AeroSystems’ annual revenue comes from 737 components produced for Boeing. The company warned that the work suspension “will have an adverse impact” on its finances, operations and cash flow. 

“Spirit is evaluating all potential actions to align its cost base with lower production levels expected in 2020. Decisions will be guided by a focus on what is best for the long-term interests of Spirit’s stockholders and other stakeholders, including employees,” it said.

General Electric Co., which supplies the LEAP 1-B engine for the MAX, is also suffering because of the production delay. The manufacturer has not received full payments for engines it delivered since the grounding and estimates that it lowered cash flow by $1.4 billion this year. Moody’s Investor Service projects GE will receive less than 50% of that amount in 2020, and may have to wait longer to collect, depending on when Boeing finally makes deliveries to customers.

Boeing has been producing 42 737 MAX planes per month, down from 52 at the beginning of the year, and has almost 400 units sitting on tarmacs for delivery to customers once the flight ban is lifted. 

The head of the European Union Aviation Safety Agency told the Financial Times he expects to approve the 737 Max’s return to service in Europe by the end of February. Reuters has reported the FAA does not expect to allow the plane to fly until February at the earliest.

American Airlines and Southwest Airlines said they plan to start flying the 737 MAX again in the first half of April.