American Airlines tells Boeing: No financing, no 737 Max deliveries

A file picture of American Airlines Boeing 737 Max planes.

Patrick T. Fallon | Bloomberg | Getty Images

American Airlines executives have instructed Boeing they won’t take supply of 17 737 Max airplanes until the provider can safe financing to pay for the plane, folks aware of the discussions instructed CNBC.

The 17 Max planes are already constructed, however is not going to be delivered till the Federal Aviation Administration recertifies the plane and removes a grounding order, which is anticipated to occur later this summer time or by early fall.

When the FAA grounded the Max in March 2019, it meant Boeing was not allowed to ship the 17 Max planes it had constructed for American. During the 15 months because the grounding, the financing for a few of the 737 Max planes expired, leaving them unfunded.

The state of affairs means Boeing Capital, which is Boeing’s financing division, should discover a technique to prepare financing for these planes. This might contain Boeing Capital shopping for the planes and leasing them to American.

Another potential state of affairs might contain third-party plane leasing corporations financing the planes in query.

While Boeing is not going to remark particularly on its discussions with American, or on another order, the corporate instructed CNBC: “Our focus continues to be on working with global regulators on the rigorous process they have put in place to safely return the 737 MAX to commercial service. We are not going to comment on discussions with our customers. It is an unprecedented time for our industry as operators confront a steep drop in traffic. We continue to work closely with our customers to support their operations, while balancing supply and demand with the realities of the market.”

American has already taken supply of 24 Max planes, and has one other 76 ordered with Boeing. The Wall Street Journal beforehand reported American executives have threatened to cancel a few of its Max orders.

Those aware of the talks instructed CNBC that the potential cancellation of deliveries solely includes the 17 Max planes scheduled to be turned over to American this yr. Orders for its remaining 59 Max planes haven’t modified and the airline has no plans to cancel them.

Earlier this summer time, as American was burning via greater than $50 million a day, CFO Derek Kerr mentioned his airline wouldn’t take supply of latest airplanes until the plane have been financed with phrases much like these the airline loved earlier than the Covid-19 pandemic.

The 737 Max, Boeing’s bestseller, has been grounded worldwide within the wake of two crashes that killed 346 folks. Boeing has since made modifications to a flight-control system in an effort to get the plane recertified and flying once more.

— CNBC’s Meghan Reeder contributed to this text.

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