American Airlines tells Boeing: No financing, no 737 Max deliveries

Finance

A file photo of American Airlines Boeing 737 Max planes.

Patrick T. Fallon | Bloomberg | Getty Images

American Airlines executives have told Boeing they will not take delivery of 17 Boeing 737 Max airplanes unless the airline can secure financing to pay for the aircraft, people familiar with the discussions told CNBC.

The 17 Max planes are already built, but will not be delivered until the Federal Aviation Administration recertifies the aircraft and removes the grounding order, which is expected to happen later this summer or by early fall.

When the FAA grounded the Max in March 2019, it meant Boeing was not be allowed to deliver the 17 Max planes it had built for American. During the 15 months since the grounding, the financing for some of the 737 Max planes expired, leaving them unfunded.

The situation means Boeing Capital, which is Boeing’s financing division, will have to find a way to arrange financing for those planes. This could involve Boeing Capital buying the planes and leasing them to American.

Another possible scenario could involve third-party aircraft leasing companies financing the planes in question.

While Boeing will not comment specifically on its discussions with American, or on any other order, the company told CNBC: “Our focus continues to be on working with global regulators on the rigorous process they have put in place to safely return the 737 MAX to commercial service. We are not going to comment on discussions with our customers. It is an unprecedented time for our industry as operators confront a steep drop in traffic. We continue to work closely with our customers to support their operations, while balancing supply and demand with the realities of the market.”

American has already taken delivery of 24 Max planes, and has another 76 ordered with Boeing. The Wall Street Journal previously reported American executives have threatened to cancel some of its Max orders.

Those familiar with the talks told CNBC the possible cancellation of deliveries only involves the 17 Max planes scheduled to be turned over to American this year. Orders for its remaining 59 Max planes have not changed and the airline has no plans to cancel them.

Earlier this summer, as American was burning through more than $50 million a day, CFO Derek Kerr said his airline would not take delivery of new airplanes unless the aircraft were financed with terms similar to those the airline enjoyed before the Covid-19 pandemic.

The 737 Max, Boeing’s bestseller, has been grounded worldwide in the wake of two crashes that killed 346 people. Boeing has since made changes to a flight-control system in an effort to get the aircraft recertified and flying again.

—CNBC’s Meghan Reeder contributed to this article.

Products You May Like

Articles You May Like

Coronavirus updates: Russia offers Philippines potential vaccine; key model predicts 300,000 U.S. deaths
Lyft reports dramatic revenue drop of 61% but points to uptick in rides in July
Accuracy of U.S. coronavirus data thrown into question as decline in testing skews drop in new cases
Wall Street’s top analysts are betting on stocks like GoDaddy and Carvana to beat the market
At least 1 million people may not get Trump’s $400 unemployment boost

Leave a Reply

Your email address will not be published. Required fields are marked *