Airlines forced to 'adapt' amid Boeing's troubles: Analyst

As Boeing (BA) grapples with persistent challenges in aircraft production, TD Cowen Senior Research Analyst Helane Becker joins Yahoo Finance Live to discuss the ripple effects on the broader airline industry.

Despite strong demand, she notes that the disruption to Boeing's manufacturing and delivery capabilities "limits growth" for airlines. Companies will be forced to limit workforce expansion, which will hamper service offerings. "Without a robust airline industry, it's very hard to have a robust economy," Becker warns.

Airlines are left with little choice but to "adapt" to Boeing's struggles, Becker explains: adjusting operations to limited aircraft supply will involve restructuring order books and reducing capacity.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Angel Smith

Video Transcript

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JULIE HYMAN: With just over 10 minutes left till the closing bell on Wall Street, we're looking at how to navigate the big picture with the Yahoo Finance playbook. Boeing's bumpy start to 2024 is hitting its customers. Several airlines looking to cut back on flights. And temper hiring plans citing uncertainty tied to fewer Boeing deliveries.

With more on the impact, we're speaking with Helane Becker, TD Cowen Senior Research Analyst. Hey, Helane. It's great to see you.

So we heard from Southwest today and we've got tough language from the United CEO talking about not wanting the further out deliveries from the Max 10 from Boeing. First of all, big picture. How much of a problem is this for the industry now that they're probably not going to get as many planes as they thought?

HELANE BECKER: Yeah, well, it's a problem because they can't grow as much as they originally thought, which I think investors, when they think about it, will appreciate. But demand is very strong.

And we still have air traffic control issues, especially in the Northeast. And we really appreciate the FAA's comments recently that they're working on a college to air traffic controller program. But pragmatically, it limit the whole idea of not being able to get the aircraft you thought you were going to get.

Means that there's going to be a cap on jobs, of course. United Southwest, and a few other airlines, I think, JetBlue is in that category have all said that they've put plans to hire and train new pilots and flight attendants on hold. So that limits growth.

And then, of course, going from smaller aircraft to larger aircraft, it doesn't help consumers, because the larger aircraft gives you a greater-- gives you greater comfort in the planes. And it also enables growth at busy airports without necessarily adding service. So all in all, it really limits the opportunity for consumers and for corporates. Because I've always said, Julie, that without a robust airline industry, it's really hard to have a robust economy.

BRIAN SOZZI: I think Warren Buffett might have something to say about that.

[LAUGHS]

I'm wondering, the headlines are grabbed by the 737 Max issues. And we've seen problems with the 787 Dreamliner and other models over the last few years. How much of this is just a giant Boeing problem? And then what does that say as to the overhang of the industry? How does the industry crawl out of this?

HELANE BECKER: Yeah, so I can't really comment to Boeing specifically because it's not in my coverage universe. But I can say that from an industry perspective, the airlines have done what they always do. And that's adapt.

They are cutting their capacity growth. They're restructuring their order books. And that's really important.

People don't think about that. Because as deliveries move to the right, you might have fewer aircraft deliveries this year. Say you were expecting 100 and you only get 50.

That means 50 from this year slide into next year. And then at some point in the future, we expect that-- and our analysts who covers Boeing, does expect that they'll catch up. And so maybe in two or four years, you wind up taking delivery of four times as many aircraft as you otherwise would have.

And you have to restructure the order book because no system can handle 200 deliveries in one year versus 50 or 100. You can probably handle 100, which when you think about it is still one roughly. A week one every 3 and 1/2 four days. So it's still a lot of capacity.

But it postpones growth. And it means that airlines have to think their plan, rethink their plans in that regard.