Boeing’s first strike in 16 years could worsen a global shortage of jetliners that is pushing up air fares and forcing airlines to fly older jets for longer, industry executives and analysts said.
Workers at the US plane maker’s west coast went on strike at midnight on Friday after they overwhelmingly rejected a contract deal that halted production of Boeing’s 737 Max aircraft.
This is Boeing’s first strike since 2008, and Boeing Chief Financial Officer Brian West has warned that a prolonged strike could hurt production and “jeopardize our recovery.”
“Boeing is a systemically important company to global aviation,” Ross O’Connor, chief financial officer of Irish leasing company Avolon, told Reuters on Friday.
Speaking after Avolon announced it would acquire a large portfolio of jet aircraft from Castlelake, he said the strike “could have an impact on production levels, which would certainly exacerbate the supply shortages currently in the market.”
Airlines are having difficulty expanding capacity to meet rising demand, as the supply of jetliners is dwindling due to parts shortages, industry-wide hiring problems and overburdened maintenance shops.
Analysts warn that the most promising part of the industry’s crucial business cycle may be over before airlines reap the full benefit of demand.
“It will take a long time before we see this equilibrium. I am starting to develop the hypothesis that it will not be (additional) supply that will fix this, but rather softening demand,” said Rob Morris, global head of consulting at Cirium Ascend.
Some say higher airfares — while good for airlines in the short term — could themselves push that tipping point further.
“I believe (average fares) will go up; and when ticket prices go up, all other things being equal, traffic levels will go down,” said Adam Pilarski, senior vice president and aviation economist at Aviatas Consultancy.
Boeing has halted production of its best-selling jet, while European rival Airbus is also struggling to meet its targets.
Airbus Chief Executive Guillaume Faury expressed optimism at a US Chamber of Commerce conference this week that the European plane maker would meet its recently lowered target of delivering 770 planes this year, made after profit warnings and engine supply disruptions over the summer.
But after a short-lived surge in deliveries in July, industry sources questioned how easily the world’s largest plane maker would surpass last year’s 735s.
The dwindling number of aircraft in storage and record-high utilization of existing aircraft confirm the shortage of supply.
Increasing the age of the fleet
For now, Boeing’s lower production levels compared with Airbus could limit the ripple effect of a strike. Still, analysts say airlines have little room to maneuver.
As available capacity from leasing companies is also being depleted, airline companies will have to continue flying existing jets for longer periods of time.
The average age of the fleet has declined over most of the past 15 years, as airlines and leasing companies took advantage of low interest rates to invest in new fuel-efficient jets.
The average age of the widely flown single-aisle jet fleet in 2010 was about 10.2 years, according to data from Cirium.
The age dropped to 9.1 years as airlines grounded their fleets during the pandemic, but it’s now starting to rise again. It’s now 11.3 years “and still rising,” Morris said.
This is despite efforts to reach net zero emissions by 2050, which depends in part on modernizing aircraft in service.
“That means we’re burning more CO2 than we need to because we’re using older aircraft … so one thing that can go wrong is sustainability,” Morris said.
The airline industry says it is confident of reaching its goal of net zero emissions by 2050.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
