Airline companies are once again facing problems. A month ago, news outlets were reporting that American airlines were facing serious staffing issues. Now it seems that they have another major hurdle to contend with. American Airlines (NYSE: AAL) announced on Thursday that it would be cutting back even more flights than before due to a lack of scheduled Dreamliner planes previously ordered.
The Dreamliners in question were originally ordered from Boeing (NYSE: BA). However, the airplane manufacturer has since said that it won’t be able to make its initially planned deliveries on time. Production issues are pushing back delivery dates by over 12 months, with airlines forced to cut flights due to a lack of planes.
For American, that means the airline won’t fly to Ireland, Hong Kong, Croatia, and a few other seasonal locations, while also cutting back on flights to places like China. Boeings deliveries are expected sometime Q1 2022, if not much later, but that might already be too late.
“Without these wide-bodies, we simply won’t be able to fly as much internationally as we had planned next summer, or as we did in summer 2019,” said chief revenue officer Vasu Raja in a statement.
Other airline companies have been facing similar issues as of late. United Airlines (NYSE: UAL) said that its also expecting an arrival of new Dreamliners before the end of 2021. Since these new plans from Boeing haven’t arrived yet, its likely that United will also make a similar announcement to cut flights as American Airlines just did.
Some other international companies affected by Boeing’s delays include Italian planemaker Leonardo SpA. Leonardo helps make fuselage parts for Boeing’s Dreamliners, but the company said it plans to fire more than 1,000 employees due to logistical issues. Even suppliers are being affected by Boeing’s production woes.
Under existing contracts, airlines are allowed to walk away without penalty from an existing contract if Boeing fails to make deliveries on time. Usually, that period of time is a year, and if Boeing is late by less than that, then the contract still stands. By April 1st, Boeing will have 66 Dreamliners produced that might have no buyers, as the airlines buying those planes by that date will have the option to walk away from their contracts.
Shares of most airlines were down a bit on this whole situation. American Airlines dipped by around 1.0% today, while United and Delta were down more than 2.5% as well. Boeing was down by a similar margin as well. The general consensus for the aviation industry remains bearish. Despite the new variant not being as much of a risk as first anticipated, airline stocks are continuing to trade lower than they’ve been this entire year. Chances are, that’s not going to change anytime soon.
American Airlines Company Profile
American Airlines is the world’s largest airline by scheduled revenue passenger miles. The firm’s major hubs are Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington, D.C. After completing a major fleet renewal, the company has the youngest fleet of U.S. legacy carriers. – Warrior Trading News