Boeing’s problems may soon become your problems

Washington
CNN
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Boeing’s problems are not unique to Boeing. It can also cause problems for your wallet and the entire U.S. economy.

One of the largest U.S. manufacturers faces several serious production, quality and safety problems that worsened this week after a 787 Dreamliner suddenly crashed mid-flight, injuring dozens of passengers. are dealing with. It’s not yet clear whether Boeing is to blame, but it comes at a frightening time for the company, which has caused serious damage to its already tarnished reputation.

Economists say the Boeing crisis could lead to higher airfares and slower economic growth.

The aircraft manufacturer is a large company with more than 140,000 employees worldwide, and is one of the world’s two largest aircraft manufacturers (Airbus), generating tens of billions of dollars in revenue every quarter. I’m raising it.

Boeing’s production alone is a significant part of the American economy. But this country, and the world, relies on airplanes for travel, business, deliveries, and jobs.

Delivery delays are expected as Boeing and several airlines face intensive federal scrutiny of their manufacturing processes, reducing the number of planes available to Americans and reducing the economic stimulus benefits typically provided. may all be lost.

Boeing’s most famous in-flight disaster was the door plug of an Alaska Airlines 737 Max that was blown off the side of the plane shortly after takeoff. It clearly means that the company has a problem to deal with.

Boeing has already slowed production of its popular 737 Max jet, following regulatory scrutiny of its practices, and has already reduced scheduled flights as airlines brace for delivery backlogs. connected to the stool. The sharp 6.1% drop in new orders for durable goods in January was mainly due to a decline in orders for Boeing jet aircraft.

Boeing reported this week that it shipped just 17 Max planes in February, half the amount it shipped in December. Southwest Airlines and United Airlines announced earlier this week that Boeing is expected to ship fewer planes than it plans to take in, meaning it will hire fewer pilots.

If there are fewer jets, airfares could also rise.

Kathy Bojancic, Nationwide’s chief economist, told CNN: “Less supply of aircraft coming online means there will be more demand for air travel than capacity can meet, all else being equal. “However, upward pressure on airfares continues.” “Airfares have already risen in recent months, rising 3.6% in February.”

Boeing needs to deal with its own issues, so it won’t cut jobs even if demand for its planes falls.

Jose Torres, senior economist at Interactive Brokers, told CNN: “I don’t see the company cutting back on its workforce when there are serious quality concerns. If anything, Boeing will resolve the quality issues. “We may try to increase employment for this purpose.”

Rising labor costs will mean further losses for Boeing, putting the company into an even deeper financial hole. That would further damage Boeing’s already declining stock price.

Slowing US economic growth and benefits for Airbus

Regulators believe Boeing will halt production of its 737 Max jets in January 2020 after two fatal crashes in 2019 and the subsequent grounding of the jets in the same year. At the time, the New York Fed estimated that the production shutdown could reduce U.S. gross domestic product (GDP) by 0.4%. The broadest measure of economic output in 2020. (Boeing continued to manufacture the 737 Max during the crisis).

Then, of course, the pandemic hit and the company took an even bigger hit, with losses that year amounting to nearly $12 billion.

A New York Fed analysis said Boeing is a large company that is highly integrated into the nation’s production network, and a production stoppage could have “significant macroeconomic implications.”

Boeing is the single largest exporter of the United States, so if demand for its aircraft weakens, exports will decline, contributing to GDP growth if exports exceed imports (known as “net exports”).

Boeing has not announced it will completely halt production of its planes, but plans to increase production of the 737 Max are on hold as the Federal Aviation Administration awaits the company’s plan on how to resolve ongoing quality issues. .

And Boeing’s long-standing problems led to the success of its French rival Airbus, which overtook Boeing to become the world’s largest aircraft maker.

It’s not easy for airlines to switch manufacturers overnight, but the trend is clearly in Airbus’ favor, with imports of Airbus planes for U.S. domestic airlines on the rise as Boeing actually suffers from weaker demand. This would put pressure on US GDP.

Lisa Simon, chief economist at Rebellio Labs, said in a statement to CNN: “The decline in airline orders for Boeing aircraft may instead be directed to Airbus and will not simply disappear.” Stated.

“This debacle will definitely have a negative impact on the US aircraft manufacturing sector,” he added, “but it will be good for the European market.”