Boeing Crisis hampering airline sector’s growth plans, says Morningstar DBRS

Boeing is back in the spotlight over safety issues following the Alaska Airlines midair door plug blowout in January.

Financial services company, Morningstar DBRS, have stated – in their commentary – that Boeing is back in the spotlight over safety issues following the Alaska Airlines midair door plug blowout in January. Boeing are also under the spotlight after a few other safety-related incidents in early 2024, including the sudden mid-air drop of a Boeing 787 aircraft operated by LATAM Airlines that resulted in several injuries. Combining Boeing’s recent issues with existing post-coronavirus supply chain issues at aircraft manufacturers, aircraft delivery delays are further worsening and may persist for a few years, impinging on the sector’s growth plans.

Key highlights in the Morningstar DBRS’ commentary include the following:

• It is expected that the re-emergence of safety concerns at Boeing may materially affect the company, including its ability to make timely deliveries, which is already affecting airlines.
• Airlines’ growth plans are being slashed because of delivery delays, and operational disruptions may occur. These disruptions could result in higher airfares, and decarbonisation targets could be affected because of delays in fleet modernisation.
• The airline sector’s challenges could be slightly positive for the air cargo sector, which is struggling because of low load factors/yields, as Boeing’s delivery delays may limit further capacity expansion.

“We previously expected the airline sector to continue its growth trajectory, with high-single-digit growth in 2024 despite a weaker macroeconomic environment. However, with Boeing’s recent issues as well as existing capacity constraints, that growth forecast may be optimistic,” said Rohit Kumar, Assistant Vice President of Corporate Ratings, Diversified Industries at Morningstar DBRS.

See the full findings in the Morningstar DBRS commentary below.