Bloomberg: Max cancellations by overstocked airlines no cause for alarm

Lauren Eldershaw
By Lauren Eldershaw March 28, 2019 13:04

Bloomberg: Max cancellations by overstocked airlines no cause for alarm

Analysis by George Ferguson at Bloomberg Intelligence shows that airlines are using the issues around the 737 Max as an excuse to cancel excess orders. Bloomberg remains confident that the Boeing Max aircraft will be deemed safe after minor modifications, pointing to the confidence of Southwest, Ryanair, Chinese airlines and lessors in the aircraft type.

“A number of carriers in Asia have over-ordered, in our opinion, committing to more aircraft than were needed in their fleet. We believe these airlines are most likely to try to get out of the backlog, especially as escalation clauses have increased the cost of airplanes,” according to Bloomberg. “Weak fares and profitability globally, especially in Southeast Asia, probably mean airlines are recalculating the number of planes needed for scaled-back growth plans.”

Bloomberg uses Lion Air as an example since it has 187 737 Max aircraft in backlog “It’s clear to us that either growth expectations were higher then, or plans included a leasing arm that didn’t work out,” says Bloomberg.

The analysis ends with a comment about China’s response to the fixes to the Max, since it says that Boeing’s existing Chinese order book, is crucial. “A large number of orders from China, along with the country’s robust contribution to air-travel growth and the likelihood that any decision will be made en masse by the government-owned Chinese airlines, underscore the pivotal role the country has in Max’s success.”

Lauren Eldershaw
By Lauren Eldershaw March 28, 2019 13:04