Last week it became clearer that the MAX 7 and MAX 10 would not be certified by year-end. This is despite some political maneuvering to help Boeing. The latest MAX wrinkle leads to another.
This morning we have another wrinkle – American Airlines pilots oppose the extension of the current MAX certification to cover the MAX 7 and MAX 10. American has not ordered either of these two MAX models. The Allied Pilots Association (APA) union is large, with 15.000 members and this makes it influential. What might the pilot unions at other big US airlines do now? If they come out with the same approach, the pressure on Congress not to provide Boeing the grandfather protection it seeks mounts.
Against that, we have Boeing’s CEO Dave Calhoun’s statement that the company could cancel the MAX 10. We are back to the standoff and who’s going to blink first?
An important number is that the MAX 10 accounts for 720 (17.3%) of the MAX backlog. The MAX 7 is much smaller at 200.  Recently there has been strong order support for the MAX10. While the MAX7 order level is comparatively low, the critical mass for these comes from Boeing’s most important 737 customer, Southwest Airlines.
Boeing does not want to upset that relationship. We are aware that within Southwest Airlines there are growing concerns about the MAX 7 delay – the delay causes expensive costs to keep older -700s flying as they “age out”. These are not costs the airline wants because it is unlikely they will be able to recover that value before the MAX 7s arrive. Will Boeing cover this cost?
The Southwest situation is a reminder of what happened at American, when it delayed deliveries of A320neos in favor of MAX 8s. The adage about “all your eggs in one basket” resonates. We thought Southwest might derisk its fleet before it selected the MAX 7. American had derisked fleet orders for two types of aircraft and then bet it all on red.
The fleet risk for MAX 7 is what it is. MAX 10 customers could take MAX9s as an interim step. The MAX9 has 6% fewer seats but 250 miles more range. Not too painful a tradeoff and one Boeing might embrace/support to keep Renton busy and customers operating.
However, there is another wrinkle we need to wait for – what will H.E. Mr. Al-Baker have to say? Is he ready to “settle” for MAX 9s if Boeing cancels the MAX 10? He can’t bet on black – he’s all in on red, too.
