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American Airlines and Southwest Airlines are scrambling to mitigate the impact of the Boeing 737 MAX grounding by postponing aircraft retirements to cancelling destinations.
Both American and Southwest have struggled to adjust their schedules to accommodate for the loss of the 737 MAX, which was grounded by global authorities in March. In the second quarter, American cancelled roughly 7,800 flights and Southwest about 20,000 flights, largely due to the grounding.
“It’s really all about the MAX,” Gary Kelly, CEO of Dallas-based Southwest, said during the airline’s second quarter results presentation on July 25. “It’s the only issue we’re dealing with.”
American is postponing the retirement of aircraft, while Southwest is both postponing retirements and cancelling destinations to mitigate the loss of the MAX. American has pushed back the retirement of some Airbus A320, 737-800 and Boeing 757-200 aircraft, CFO Derek Kerr said the company’s quarterly earnings call Thursday.
The carrier will keep 10 757s due for leave the fleet this year until 2021, American’s latest fleet plan shows. The retirement of four A320s scheduled for 2021 and 28 737-800s scheduled for 2020-2021 have all been pushed to later in the decade.
American had 24 737-8s in its fleet in March and, at the beginning of 2019, it had anticipated 40 by the year’s end. The company expects the grounding to cost it at least $400 million in pre-tax income in 2019.
Southwest has been forced to take even more drastic measures than American. With 34 737-8s when the MAX was suspended and a planned fleet of around 75 aircraft by year-end, the schedule and growth impacts are more pronounced.
The airline has removed the aircraft from schedules through Jan. 5. The move provides the company with a necessary one to two months needed to re-induct the aircraft from storage and conduct any additional pilot training mandated by US regulators, Southwest COO Mike Van de Ven said during the call.
In addition to pushing back the re-introduction of the MAX, Southwest announced today that it will end service to Newark Liberty (EWR) in November due to the grounding. This move will allow Southwest to resume growth to Hawaii, which executives says has outperformed their expectations since flights began in March.
The carrier is also postponing the retirement of seven 737-700s that had been due to leave the fleet by the end of December, Southwest CFO Tammy Romo during the call. Southwest will still remove 11 -700s this year.
Cowen analyst Helane Becker, in a Thursday report, calls 2019 a “lost year” for Southwest due to the MAX’s drag on nearly all of its metrics.
Boeing CEO Dennis Muilenburg, during the airframer’s quarterly earnings presentation on a day earlier (July 24), said the company continues to expect the MAX to return to service early in the fourth quarter barring any additional requirements from regulators.
Featured image by Joe Raedle/Getty Images.
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