American Airlines Group (AAL 2.61%) is reportedly considering cancelling some of the Boeing (BA +0.43%) 737 Max planes it has on order, a fresh threat to Boeing's troubled jet.
American has orders for 100 737 Max airplanes plus options for 60 more, and as recently as February, was eager to take delivery on the planes as soon as possible. But the COVID-19 pandemic has switched airlines from growth to focusing on survival, and with traffic demand down year over year the carriers are looking to shrink their fleets instead of expand.
Image source: American Airlines.
According to a Friday Wall Street Journal report American has threatened to cancel some of its 737 Max orders. The report said American has had issues securing financing for 17 jets it had expected Boeing to deliver this year.
The company declined comment, but American has the highest debt total in the industry and has been adding new debt in recent months to survive as it burns through about $40 million per day.
Boeing's 737 Max had issues even before the pandemic. The plane has been grounded since March 2019 following a pair of fatal accidents. Boeing hopes to have it airborne again later this year, but the company will likely find it difficult to place all the planes it has manufactured but not yet delivered.
A number of Boeing customers have already cancelled 737 Max orders this year. With each new cancellation it grows more likely Boeing will be forced to slow 737 Max production rates in 2021 and perhaps beyond as it works through its inventory backlog.
