Boeing strike could exacerbate global jetliner shortage, experts say By Reuters

By Tim Hepher and Padraic Halpin

WASHINGTON/DUBLIN (Reuters) – Boeing’s ( NYSE: ) first strike in 16 years could further worsen a global shortage of jetliners that has driven up fares and forced airlines to keep older planes flying longer time, industry executives and analysts said.

Workers at the US planemaker’s west coast went on strike at midnight on Friday after overwhelmingly rejecting a contract deal, halting production of Boeing’s 737 MAX.

It is Boeing’s first strike since 2008, and Boeing Chief Financial Officer Brian West warned that a prolonged walkout could hurt production and “jeopardize our recovery.”

“Boeing is a systemically important company for global aviation,” Ross O’Connor, chief financial officer of Irish leasing company Avolon, told Reuters on Friday.

A strike “could have an impact on production levels, which could certainly exacerbate some of the supply shortages that exist in the market right now,” he said after Avolon announced it had acquired a large portfolio of aircraft from Castlelake.

Airlines have been scrambling to expand capacity to meet growing demand as aircraft deliveries are curtailed by parts shortages, industry-wide recruiting problems and overburdened maintenance shops.

Analysts have warned that the most promising part of the industry’s all-important business cycle could run out before airlines have a chance to enjoy the full benefits of demand.

“It’s going to be a significant amount of time before we see that balance. I’m beginning to develop the hypothesis that it won’t be (extra) supply that will correct it, but a softening of demand,” said Rob Morris, global head of consulting at Cirium Ascendant.

Some say high airfares — while good for airlines in the short term — could themselves accelerate that tipping point.

“My view is that (average rates) will go up; and when ticket prices go up, then all other things being equal, you have lower traffic levels,” said aviation economist Adam Pilarski, senior vice president at consultancy AVITAS.

As Boeing halts production of its best-selling plane, 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 will meet a recently reduced target of 770 deliveries this year, following a warning of profit and a summer engine supply error.

But after a short-lived increase in deliveries in July, industry sources questioned how comfortably the world’s largest planemaker would surpass last year’s 735.

The decline in the number of aircraft in storage and the record utilization of existing aircraft confirm the tightening of supply.

Age of the growing fleet

For now, Boeing’s lower production levels compared to Airbus could limit the strike’s incremental effect. However, analysts said airlines have little room to maneuver.

As leasing companies run out of available capacity, carriers must keep existing aircraft flying longer.

For most of the past 15 years, the average age of the fleet has declined as airlines and leasing companies have taken advantage of low interest rates to invest in new, fuel-efficient aircraft.

In 2010, the average age of the large-scale single-aisle fleet was about 10.2 years, according to Cirium data.

After dropping to 9.1 years during the pandemic, when airlines grounded their fleets, the age has started to rise again. It’s now 11.3 “and still going up,” Morris said.

This is despite efforts to reach net zero emissions by 2050, which rely in part on modernizing aircraft in service.

“It has to mean we’re burning more CO2 than we should because we’re using more old aircraft … so one of the things that can go wrong is sustainability,” Morris said.

The airline industry says it is confident it will reach its net-zero emissions target by 2050.