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Key Boeing Customer Announces Further Cuts to 737 Max Order

By Lou Whiteman – Updated Jul 29, 2020 at 8:18AM

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The announcement comes as Boeing lays out plans to scale back production of the Max, other planes.

Aircraft leasing company AerCap (AER 2.05%) said Thursday it has canceled 15 additional orders for Boeing (BA 1.85%) 737 Max jets as it prepares to deal with an expected slowing in demand for new planes due to the COVID-19 pandemic.

AerCap, which is in the business of buying planes from manufacturers and leasing them to airlines, has been reworking its order book in response to pandemic-related travel declines. In May, the company negotiated the deferral of 37 aircraft originally expected to be delivered in 2021 and 2022 to later years.

A Boeing 737 Max in flight.

Image source: Boeing.

The company announced Thursday that it has an agreement in place with Boeing to further restructure its order, including the cancellation of 15 737 Max planes. With the new deal, AerCap now has 80 737 Max jets on order.

The announcement comes on the same day that Boeing announced a second quarter loss and said it burnt through more than $5 billion in the quarter due in part to a lack of deliveries. The 737 Max had issues well before the pandemic, with the plane grounded in March 2019 after a pair of fatal accidents.

Boeing hopes to resume Max deliveries by the end of the year, but with airlines retrenching, it is going to be hard for the company to quickly place the more than 400 737 Max planes it has in storage. That, in turn, will impact future production plans as Boeing attempts to balance working down its inventory with keeping its suppliers healthy.

Boeing announced a series of production cutbacks designed to address falling demand for new aircraft. The company will cut 787 Dreamliner production to six per month in 2021, cease production of the 747 by 2022, and delay the debut of its new 777X until 2022.

Boeing has told suppliers it expects to build fewer than 80 737 Max planes this year, but the company said it hopes to gradually increase production to 31 per month in 2022. Prior to the grounding and COVID-19, Boeing had expected to be manufacturing more than 55 737 Max planes per month by now.

Lou Whiteman owns shares of AerCap Holdings. The Motley Fool recommends AerCap Holdings. The Motley Fool has a disclosure policy.

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