UAL - Airbus Positioned To Capitalize On Industry Chaos

2024-01-30 13:50:18 ET

Summary

• Boeing 737 MAX delivery delays and the FAA's decision to cap MAX production provide opportunities for Airbus.
• United is one of Boeing's largest customers for both its 737MAX and 787 widebody models.
• Airbus will attempt to sell other product lines to United and other customers as it considers requests to offset MAX delays via its best-selling A321NEO.

It didn't take long after an Alaska Air Group, Inc. ( ALK ) MAX 9 aircraft lost a plugged emergency exit on January 5, 2024, to realize that the industry would be deeply impacted. While theories quickly flew about the reason for the failure of an aircraft that had been delivered new to the Seattle-based airline from The Boeing Company ( BA ) just two months earlier, inspections of other MAX 9 aircraft and the subsequent grounding of the U.S. carrier MAX 9 fleet - operated by Alaska and United Airlines Holdings, Inc. ( UAL ) would reveal multiple aircraft with missing or improperly tightened fasteners in or around the emergency exit door plug. The FAA recommended inspections of other Boeing aircraft that share the same design including the 737-900ER and yet there were few if any significant findings of abnormalities, pointing to recent production issues. While the National Transportation Safety Board continues to investigate, it appears that Boeing 737 production and quality control is suspected as the primary cause although the number of players involved in the potential lapse is not clear at this time.

Spirit AeroSystems Holdings, Inc. ( SPR ) produces Boeing 737 fuselages in Kansas and they are shipped by rail to Washington State where Boeing completes production; reports indicate that the door plug is produced by an offshore supplier even before Spirit begins producing the fuselage. SPR has suffered from quality lapses which has slowed Boeing production. Whistleblower reports and NTSB information indicates that the specific ALK aircraft suffered from production issues which required the attention of SPR and its contractors that are embedded in the 737 production process at Boeing's Renton, Washington 737 production facility. Regardless of where the problem originated, Boeing ultimately delivered the aircraft and is responsible for ensuring that any production problems are addressed, even if they originate at subcontractors....

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