AIR Airbus SE

By Doug Cameron 

The crisis that has embroiled the world's airlines is now hitting the industry's biggest aircraft makers, Boeing Co. and Airbus SE, and further challenging Boeing's efforts to return its 737 MAX to service.

Airbus said it was slashing production by about a third after booking just 21 net orders for jets in March and delivering 36 jets to customers, amid a flood of requests by customers to defer and cancel orders.

Underscoring the challenge for Boeing's 737 MAX, Airbus said it was cutting its production of the MAX's chief rival -- the A320 -- to 40 a month, down from about 60 precrisis. Chief Executive Guillaume Faury said the company was working on "operational and financial mitigation measures to face reality" amid the coronavirus pandemic, including slashing spending and cutting costs at its plants.

Boeing is trying to win Federal Aviation Administration approval to return some 800 MAX jets to service, after two deadly crashes blamed in part on the plane's flight-control systems.

A sharp drop in demand and government travel restrictions around the world aimed at curbing Covid-19 fatalities have socked airlines. Carriers have responded by grounding large chunks of their capacity. Some 15,500 jetliners -- two-thirds of the global fleet -- are essentially parked, according to tracking service Cirium.

Avolon Holdings Ltd., one of the world's largest aircraft-leasing companies, last week said it had canceled an order for 75 MAX jets and pushed back the delivery of others until later in the decade. The Chinese-owned firm delivered the first MAX to an airline in 2017, but said it hadn't placed any of the new planes it had ordered with customers. It originally expected to receive 24 of the planes in 2020.

Boeing had hoped to restart limited MAX production in May. But the coronavirus pandemic forced the indefinite closure of its main assembly plants near Seattle and one in South Carolina. It has said it expects regulators to approve the plane for flight by midyear after it made a number of fixes to flight-systems software and pilot training.

Before the pandemic, Boeing had planned to deliver much of its backlog of completed MAX jets, and analysts forecast it would assemble as many as 200 more this year. With airlines putting planes out of service to deal with capacity cuts, those forecasts are being cut sharply.

Boeing hasn't provided delivery guidance since the MAX was grounded. It is expected to disclose its own monthly deliveries next week.

"Any aircraft taken for delivery now would go straight into storage," said Sheila Kahyaoglu, an analyst at Jefferies & Co.

Boeing delivered just 30 jets through February, including four military versions of commercial planes, and a dozen more in March -- most of those at the start of the month -- according to tracking service Planespotter.com.

Almost three-quarters of Boeing deliveries went to U.S. carriers. Travel restrictions in place to curtail the pandemic also limit the ability for overseas carriers to collect new deliveries of jets.

U.S. airlines could be a bright spot for MAX deliveries. American Airlines Group Inc. was due to receive as many as 24 MAX jets this year. The company said it is still interested in taking deliveries to replace older planes it has opted to retire early.

United Airlines Holdings Inc. was down to take 32 in 2020. It hasn't said how many it might now take, after slicing a third of its planned capital spending for the remainder of the year.

Like Avolon, other aircraft lessors serving smaller overseas carriers have backed away from some of their MAX commitments. AerCap Holdings NV and Air Lease Corp., two of the largest aircraft lessors, have either deferred some of their MAX orders or swapped them for other Boeing jets.

Benjamin Katz contributed to this article

Write to Doug Cameron at doug.cameron@wsj.com

(END) Dow Jones Newswires

April 08, 2020 15:23 ET (19:23 GMT)

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