Airlines earnings take a hit from worldwide Boeing 737 grounding

Published on: 09 Jul, 2019

U.S. airlines are feeling the effects of the recent worldwide grounding of all Boeing 737 Max airplanes which was put into effect by the Federal Aviation Administration following two recent fatal crashes. As a result, airlines with the aforementioned models in their fleets have had to cancel flights and lost customers to competitors. A number of airlines are to report earnings this month with Delta (NYSE: DAL) seemingly having suffered the least.

United Airlines (NASDAQ: UAL) has 14 of the Boeing jets in its fleet and has removed the plane from its schedule. The airline hasn’t been impacted as heavily as its competitors, with shares up about 8% in 2019. Analysts predict a revenue of USD 11.3 Billion and per share earnings of USD 4.04.

Southwest Airlines (NYSE: LUV) has more of the Boeing jets in its arsenal than any other U.S. airline. The Company has also cut out the planes from its schedule up until Oct. 1, but it may be impacted for even longer according to Gary Kelly, Chief Executive Officer of Southwest. The Company is expected to post a profit of USD 1.34 per share and revenue of USD 5.9 Billion.

Summer is the height of all the travel seasons and airlines are experiencing optimal conditions with high air travel demand and a decrease in fuel prices. However, various investors are hungry to know how these carriers plan on compensating for the dozens of planes that are out of service. Boeing (NYSE: BA) has developed a software update for the issue on the planes that investigators have implicated, but the change hasn’t been approved by regulators and thousands of flights were forcibly cancelled.

The planes were put into use in May 2017 so they may not be significant parts of airline fleets, but regulators haven’t shown any indication when the jets would be cleared to fly again. United’s CEO, Oscar Munoz, has stated that some customers may not even want to fly in the Max out of safety concerns.

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