Big U.S. Boeing customers want the 737 MAX but say contracts need re-set

CHICAGO (Reuters) – Two of Boeing Co’s (BA.N) biggest commercial airline customers said on Thursday they are still committed to the 737 MAX despite delays in its return to flight and the coronavirus pandemic, though the head of Southwest Airlines (LUV.N) said contracts need to be “completely reset.”

Boeing is behind on hundreds of 737 MAX deliveries since regulators grounded the jet worldwide last year in the aftermath of two crashes that together killed 346 people.

Since then, airlines’ financing on jet orders has expired, forcing a scramble by Boeing to arrange new financing as it awaits regulatory approval for design changes.

American Airlines Chief Financial Officer Derek Kerr said the carrier is in “good discussions” with Boeing to finalize financing terms on 17 737 MAX jets that were to be delivered this year, adding that the airline still wants its full order for 100 MAX planes, over time.

“We totally plan on taking those aircraft,” Kerr said on a quarterly conference call. “Just when we take them is the discussion that we’re having.”

When the MAX was grounded in March 2019, U.S. airlines were growing their networks and eager to add the fuel-efficient MAX jets to their fleets. But they have been parking planes as the pandemic has sapped demand.

American and Southwest each posted a quarterly loss on Thursday and American has said it will not take delivery of any aircraft that are not financed.

Southwest said it had agreed with Boeing to take no more than 48 aircraft through the end of 2021, although Boeing had projected the plane to return to service sooner.

Southwest executives said they probably need fewer than those 48, and had not finalized any specifics with Boeing, giving them flexibility to continue monitoring demand for the next 18 months.

CEO Gary Kelly added: “I think the way to visualize the situation with Boeing is that basically, where we go from here needs to be negotiated, period.”

The Federal Aviation Administration is unlikely to certify the 737 MAX for flight before October, an official briefed on the matter told Reuters, and Southwest said on Thursday it will take at least a couple of months after approval before it flies the jets with passengers.

A mid-December return to its schedule is a “best-case scenario,” Southwest CFO Tammy Romo said.

American was the launch customer of the MAX and Southwest was the world’s largest operator of the aircraft before its grounding.

Separately, Spirit Airlines (SAVE.N) said it has reached an agreement with Europe’s Airbus (AIR.PA) to defer aircraft deliveries during 2020 and 2021.

Reporting and photo: Reuters

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