United Airlines Faces Financial Setback Due to Boeing's Quality Problems

United Airlines announced on Tuesday that it suffered a financial loss due to ongoing quality issues with Boeing aircraft. Specifically, the grounding of the Boeing 737 Max 9 after a door plug incident on an Alaska Airlines flight cost the company $200 million in the first quarter.

The airline did not mention whether it expects Boeing to reimburse the costs incurred during the three-week grounding of its 737 Max 9s following the incident on January 5. However, United did highlight that it would have been profitable if not for the expenses related to the grounding.

The Federal Aviation Administration grounded the 737 Max 9 model of Alaska Airlines after a door plug blow out, raising concerns about Boeing plane safety and quality. United, heavily reliant on Boeing planes for 80% of its mainline fleet, was the most affected with 86 Max 9 jets, the highest among all airlines.

United faced additional challenges such as engines catching fire and wheels falling off planes, which gained more attention following Boeing's issues. CEO Scott Kirby reassured customers of a renewed focus on safety by United employees. The FAA has also increased oversight on United to ensure safety measures are in place.

Boeing 737 Max 9 planes are being used by United Airlines at Newark Liberty International Airport (EWR) in Newark, New Jersey, US. The TSA predicts that travel volumes will be almost 6% higher than in 2023 during the peak spring break travel season.

Photographer: Bing Guan/Bloomberg via Getty Images

Boeing 737 Max 9 planes operated by United Airlines at Newark Liberty International Airport (EWR) in Newark, New Jersey, US, on Wednesday, March 13, 2024. The TSA expects travel volumes during the peak spring break travel season at nearly 6% above 2023. Photographer: Bing Guan/Bloomberg via Getty Images

Bing Guan/Bloomberg/Getty Images

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FAA to take a closer look at United after a series of incidents

Boeing’s publicity woes and the grounding of the jets weren’t the only way that the airplane manufacturer hurt United.

United Airlines announced on Tuesday that they will only be receiving 61 single-aisle jets from Boeing this year, which is 40 fewer than originally planned. Due to the decrease in flights, the airline has frozen pilot hiring and is offering voluntary unpaid furloughs to pilots.

Furthermore, United has stated that they do not expect to receive the Boeing 737 Max 10, the newest and longest version of the Boeing 737, this year. The plane has not yet been certified by the FAA for passenger flights, and with concerns about Boeing jet quality and safety, certification may be delayed until at least 2025.

United has decided to convert some of its Max 10 orders to the Max 9 for deliveries between 2025 and 2027. Additionally, the airline mentioned the possibility of converting more orders to the smaller versions of the plane.

In a move that may worry Boeing, United announced on Tuesday that it has made agreements with two leasing companies to lease 35 new Airbus A321neos, which compete with the 737 Max. The deliveries of these Airbus planes are scheduled for 2026 and 2027.

United reported an adjusted loss of $50 million in the quarter, showing improvement from the $207 million loss in the same period last year. Revenue increased by nearly 10% to $12.5 million.

The increase in revenue was mainly due to a 9% rise in miles flown by paying passengers, despite the grounding of the 737 Max 9. Measures of fares, like the average amount paid per available seat adjusted for miles flown, also saw a 1% increase.

Editor's P/S:

The article highlights the ongoing difficulties faced by United Airlines due to quality issues with Boeing aircraft, primarily the grounding of the 737 Max 9. The financial loss of $200 million incurred during the three-week grounding has raised concerns about Boeing's reliability and the impact on United's operations. The airline's heavy reliance on Boeing planes, with 80% of its mainline fleet made up of Boeing aircraft, has exacerbated the issue.

United's decision to lease 35 Airbus A321neos, which compete with the 737 Max, signals a potential shift in its long-standing relationship with Boeing. This move suggests that United is exploring alternative options to mitigate the risks associated with Boeing's quality concerns. The delay in the certification of the Boeing 737 Max 10, along with the ongoing investigations into Boeing's manufacturing processes, could further strain the relationship between the two companies.