Damaged Trust
Looming over the short-term financial impact of the Max’s grounding is a bigger question about the plane’s market appeal after the two accidents damaged public trust in Chicago-based Boeing.
Executives have vowed to make the plane safer than ever as they work to rebuild consumer confidence. And defecting might be tricky for airlines, with Airbus SE grappling with factory delays for its A320neo jets and a full order book through 2023.
Other aircraft associated with tragedy, such as McDonnell Douglas Corp.’s DC-10, continued to sell for years. But they did so on a smaller scale. And Boeing had already been losing market share to Airbus, reversing the superior pricing and margins it had enjoyed with earlier versions of the 737, said Cunningham of Agency Partners.
Such factors make a good case for accelerating an all-new replacement for the jet, a transition that hadn’t been expected until late next decade, Cunningham said.
That’s another question mark for investors because committing to an expensive aircraft-development program would entail shifting from Boeing’s current strategy of harvesting profits from the 737 and ladling cash into shareholders’ pockets.
“From an investment standpoint, that’s a huge risk,” Cunningham said. “Instead of selling this nice old airplane you’ve been selling for 50 years at very high margins, you’ve got to make a new one.”
This article provided by Bloomberg News.