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Covid’s timing was devastating for Boeing and the 737 Max. When the planes were grounded, Boeing kept producing them assuming the issue would be resolved quick
by frogblast 6y ago
Covid’s timing was devastating for Boeing and the 737 Max.
When the planes were grounded, Boeing kept producing them assuming the issue would be resolved quickly. As of January 2020, slightly before Covid, they had 400 planes built, but not delivered to customers (and so customers haven’t paid for them). Boeing was funding these aircraft with debt.
All of a sudden, demand for air travel drops off a cliff.
All those airlines now decide “I’m just not going to take delivery of those aircraft”. Which also means “I’m not going to pay for them”.
Had the timing gone in the other order, all of those aircraft would have been delivered, and paid for, and airlines would have been holding the bag. (and the covid crisis would have limited the damages airlines could claim, and thus demand from Boeing, if they could meet their reduced schedules with other aircraft).
- FeistyOtter 6y agoCan an airline really refuse an aircraft without wasting some significant amount of money? I assume the airline or leasing company start paying from the moment they place an order all the way through construction, finished by a final payment at the moment of acceptance? When one orders a building company to build a house, you are given a payment schedule, I assume it is the same with airplanes.
- corty 6y agoAirlines on the brink of bancruptcy have to refuse such orders, even if it only saves small amounts of money. And due to Corona, virtually every airline is in financially troubled waters.
- benhurmarcel 6y agoAirliners are paid over a period yes, from the contract signature to several months after delivery. But the biggest chunk of cash changes hands at delivery.
- danielfoster 6y agoThis is true. I at least hope Boeing was able to reduce the compensation it will pay to airlines. There’s no lost income for airlines if there’s no demand for travel! Low oil prices have also not helped the situation. Airlines need fuel efficient aircraft less than ever right now.