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American Airlines: Grounded Jets Could Hurt Its Q1 Revenues

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Grounded jets hurt operations

American Airlines (AAL) faced massive business disruptions during the first quarter due to several factors. Worldwide grounding of Boeing’s (BA) 737 MAX planes was the most significant factor. The grounding caused the largest number of flight cancellations during the quarter.

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The 737 MAX series planes were grounded globally after the Ethiopia crash on March 10, which killed 157 passengers. Boeing is facing a federal investigation due to its faulty anti-stall system and how the FAA approved the system.

Currently, American Airlines owns 24 Boeing 737 MAX planes. The company has an order for 76 more planes. In a regulatory filing on April 9, American Airlines disclosed that grounding the 737 MAX planes caused ~1,200 flights to be canceled during the first quarter.

American Airlines had to remove 14 other Boeing 737-800 aircraft due to remediation and interior work, which caused 940 more flights to be canceled in the first quarter.

Due to ~2,140 flight cancellations, American Airlines expects its first-quarter total revenue per available seat mile to grow in the range of flat to 1%, which is lower than the earlier growth range of flat to 2%.

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Other airlines faced the same problem

American Airlines isn’t the only US air carrier (IYT) that has faced disruptions in normal operations during the first quarter. In late March, Southwest Airlines (LUV) disclosed that severe winter weather, unscheduled maintenance disruptions, and the grounding of Boeing’s 737 MAX series jets caused nearly 9,400 flight cancellations between mid-February and March. The airline expects the cancellations to cost $150 million in first-quarter revenues.

Another major US air carrier, United Airlines (UAL) revealed on April 9 that it has to use larger planes like Boeing’s 777 or 787 to cover the routes of grounded 737 MAX planes. United Airlines owns 14 MAX jets. The company said that the grounding caused an increase in its first-quarter operating expenses.

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