Comments made by United Airlines CEO Scott Kirby on CNBC suggested his carrier was considering canceling its Boeing 737 MAX 10 order, but that is not the case. If anything, the comments were strategically aimed at extracting further concessions from Boeing for its beleaguered MAX program.
In Expressing Skepticism Over 737 MAX 10, United Airlines CEO Kirby Is Positioning For Concessions From Boeing
Speaking on CNBC’s Squawk Box, Kirby lamented delivery delays that have plagued the MAX 10 and suggested the MAX 9 grounding constituted “the straw that broke the camel’s back,” prompting a strategy shift in which United is building “a plan that doesn’t have the MAX 10 in it.”
“I have a lot of confidence in the people of Boeing, but they’ve been having these consistent manufacturing challenges, and they need to take action…
“We’re now best case five years behind on the original delivery of the MAX 10, and as we’ve gone through the last year, internally at United, we’ve grown increasingly to believe that best case, the MAX 10 just gets pushed further and further to the right, so we’ve already started working on alternative plans. “I think the MAX 9 grounding is probably the straw that broke the camel’s back for us, we’re gonna at least build a plan that doesn’t have the MAX 10 in it.
$UAL CEO Scott Kirby casts doubt on Boeing 737 Max 10 order. "There are alternative airplanes for the Max 10, at least for the next few years," he tells CNBC's @Lebeaucarnews pic.twitter.com/mnFntMdJJJ
— Squawk Box (@SquawkCNBC) January 23, 2024
Do Kirby’s comments suggest United is going to cancel its order? (It has 277 on order with 200 options)
Taken at face value the answer is yes, but subsequent comments and a rudimentary analysis of United’s growth plans suggest something else at play.
Speaking at the 2023 Q4 earnings call earlier this week, Kirby was asked about his CNBC comments by Rajesh Singh of Reuters. He responded with a rosier outlook toward Boeing:
“Boeing has a storied history and thousands of great people. They’re one of the best engineering, they’re one of the best technology companies in history, they’ve been a great American company, their biggest exporter. I have — they’re going through a rough patch right now, but I believe that Boeing is across the board from top to bottom is committed to changing and fixing it. I’m encouraging them to do it even faster. And it is going to impact United in the near term because of some of the challenges they’ve had, but there are great people there and they will get it together. And we are their biggest — at critical times, we’re also their biggest cheerleader. There’s no one that’s a bigger supporter that wants Boeing to succeed outside of Boeing than me, and I’ll do everything I can to help.”
Singh then directly asked if the MAX 10 order would be canceled. Kirby emphatically said no.
“We are not canceling the order. We are taking it out of our internal plans. And so we’re taking out of our internal plans and we’ll be working on what that means exactly with Boeing. But Boeing is not going to be able to meet their contractual deliveries on at least many of those airplanes. And I’ll just leave it at that.”
That last sentence may be cryptic, but delivery and certification delays do put United in the driver’s seat. With deliveries delayed by years, United could likely exercise a contractual right to cancel.
Rather than do that, however, I suspect Kirby is simply positioning United to extract more concessions from Boeing as this process continues to unfold. United cannot just waltz over to Airbus and order hundreds of A321 jets to be delivered in the next few years. If United is to grow at all, it needs Boeing to do it.
The play here is to do it on the cheap.
United may be planning for life without the 737 MAX 10 in the unlikely scenario in which certification is denied. But in the rare chance the 737 MAX 10 never flies, the likely result is that United will take more MAX 7 and MAX 8 aircraft in its place…and at a steep discount. Boeing will move mountains to make its best customer happy.