Boeing's woes could mean higher airfares for U.S. travelers
Boeing's production woes could lead to higher airfares and fewer flights for travelers to choose from.
The aviation giant is experiencing production delays as it grapples with the fallout from a Jan. 5 emergency on an Alaska Airlines flight, including addressing manufacturing and other operational defects. That is delaying aircraft deliveries for carriers including United Airlines and Southwest Air Lines.
Boeing data shows that through the end of February, it had a backlog of nearly 4,800 orders for 737 Max aircraft. That included 71 737 Max planes purchased by American Airlines, 100 for Delta Air Lines, 219 for Ryanair, 483 for Southwest and 349 for United. Their expected delivery dates were not specified. The aircraft manufacturer delivered a total of 42 737 Max jets in the first two months of the year.
"Disappointing news for consumers"
"It's not that airlines will have to cut flights — it's that they won't be able to add as many new flights as they perhaps had hoped to for the summer," Henry Harteveldt, an airline analyst with Atmosphere Research Group, told CBS MoneyWatch. "It's disappointing news for consumers and for airlines. Consumers may not have as many flights, and airlines won't be able to offer as many flights and make more money. It's lose-lose for airlines and travelers."
Southwest said it does not publicly discuss airfare prices. United also did not comment on airfares.
Even without a delay in jet deliveries, strong consumer demand can drive up the price for tickets. But reduced aircraft production capacity and high fuel costs are expected to put even more upward pressure on the cost of flying.
"Airlines are intimating that summer demand looks good, and that to me suggests that airfares would be higher anyway," Harteveldt said. "But obviously, when an airline doesn't have all the aircraft it expects to have and thus can't operate all the flights with all the capacity, there's a chance airfares would be higher than they otherwise would have been."
Working in consumers' favor is the fact that budget airlines including Breeze, Spirit and Velo are expanding, he added. "That provides a counterbalance to the fares the larger airlines charge."
Airline plans hit turbulence
Aircraft production issues have thrown airlines' "business and capacity plans into disarray for most of the second half of the year," said Robert Mann of R.W. Mann & Company, an airline industry consulting firm.
Southwest, which only flies 737s, will feel the hit from Boeing's issues most acutely. The airline has indicated it does not expect the 86 Boeing aircraft it had ordered to arrive this year, making it impossible for the airline to add fligths.
"It will inevitably mean less capacity in the second half of the year against what the airline had indicated earlier. An abrupt reduction in capacity like that will result in some higher prices," Mann said.
He expects consumers to have fewer flights to choose from on domestic and short-haul international routes to places such as Mexico and The Caribbean.
Prices for air tickets sold in February were up about 6%, according to the Airline Reporting Corporation. Mann expects costs to rise by as much as 10% in some cases. On an average fare of $573, that's roughly $57 more; for a family of four, that amounts to an extra $230 additional dollars.
"It could be significant," he said.
Public perception of how safe it is to fly is paramount to airlines and the air travel industry. In a worst-case outcome for airlines, Boeing's woes could lead some travelers to pull back on plane travel over perceived risks.
But aircraft manufacturers' production problems aren't expected to lead to a significant change in consumer behavior, according to Scott Keyes of Going.com.
"When you buy a ticket, you're not buying from Boeing or Airbus, you by from Delta, United or Spirit," Keyes said. "You don't look at what airplane will be flying and optimistically there will be little impact on the number of travelers."
If bookings were to drop, airlines would have to slash fares to try to lure people back to the skies.
"If you shaved away one to 4%, that could have big impact on margins and we'd see cheaper fares," Keyes said.