Monday, October 25, 2021
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Grounded Boeing 737 is raising costs for airlines

🕐 1 min read

The long grounding of the Boeing 737 Max threatens to weigh on airline cost structures into next year. Airlines slice and dice their revenue and costs by the money it takes to fly one seat — sold or empty — exactly one mile. By that measure, United Airlines’ costs other than fuel rose 2.1% in the third quarter and will go up 3.5% in the fourth quarter. Executives partly blame canceled Max flights — when airlines cut flights, their total cost per mile usually rises because fixed costs don’t change. United would have lost

money if not for lower fuel prices. Investors are likely to see the Max dent earnings again when American and Southwest report third-quarter numbers next week. (Rising nonfuel costs concern investors even with airlines that don’t fly the Max, like Delta.) United CEO Oscar Munoz says no one knows when the Max will fly again after two crashes that killed 346 people. When it returns, the more fuel-efficient Max will ease airline cost pressures, but analysts worry it will create another problem — adding so many seats for sale that it causes fares to drop.

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