Boeing must add collapsing oil prices to the mountain of problems plaguing the 737 Max jet. Amid the unprecedented fall in oil prices, the single-aisle aircraft has lost its unique selling proposition.
From inception, Boeing positioned the commercial jet as being more fuel-efficient than its predecessors and stablemates in the 737 series . The aerospace titan claimed the 737 Max had the same advantage over Airbus’ newest single-aisle offering.
According to Boeing, the 737 Max offers the lowest operating costs for airlines for a plane of its size and range:
The 737 MAX 8 reduces fuel use and CO2 emissions by 14 percent over the newest Next-Generation 737 and 20 percent better than the first Next-Generation 737s. And the 737 MAX 8 uses 8 percent less fuel per seat than the A320neo.
But oil prices have plummeted in 2020. Since January 22nd, U.S. jet fuel spot prices have fallen by 64% , according to Airlines for America.
Boeing’s selling point for the 737 Max is suddenly enormously less compelling as when oil prices were sky-high.
Coupled with the aircraft’s well-document scandals and the fact that the jet has yet to be green-lighted for a return to service, the appeal of the narrow-body aircraft is languishing at an all-time low. As it stands, the extent of the negative publicity could very well nudge customers into the direction of alternative methods of air travel, including the most attractive private jet companies available.
The oil price collapse is creating additional headwinds for Boeing at a time when the coronavirus pandemic has already drastically reduced air travel.
But even before the oil price crash obliterated the 737 Max’s unique selling proposition, order cancellations of the narrow-body jet had been piling up.
Two days ago, China Development Bank’s leasing unit canceled orders for 29 yet-to-be-delivered 737 Max planes . And last week, GE Capital Aviation Services canceled an order for 69 jets .
That followed a brutal March, in which Boeing registered 150 order cancellations for its top-selling plane. Total order cancellations for the year have already soared past 300.
More than a year after being grounded, the 737 Max has yet to be re-approved by the Federal Aviation Administration. Last month, FAA chief Stephen Dickson revealed that a certification test flight would be carried out in a “few weeks.” That would mean a return to service is still months away, based on the most optimistic predictions.
This is a drastic change of fortunes for Boeing. A little over a year ago, the aircraft manufacturer was scrambling to increase production capacity to satisfy the huge demand the 737 Max had generated.
Before the fatal twin crashes led to the jet’s grounding, the aerospace and defense giant billed the 737 Max as the “fastest-selling airplane in Boeing history.”
Regulators are expected to green-light the 737 Max – eventually. But the oil price implosion – coupled with a sharp drop in demand for air travel – will make airlines less eager to upgrade to newer aircraft models.
With crude oil futures anticipating that prices will stay as low as $35 for at least the next year, fuel efficiency is not exactly a priority right now.
Expect Boeing’s 737 Max order book to keep growing thinner for the foreseeable future.