HOTR: Airlines, lessors cancel ~250 MAXes since January

By the Leeham News Staff

April 21, 2020, © Leeham News: Since the COVID-19 pandemic went viral beginning in January, there have been nearly 250 cancellations of the Boeing 737 MAX.

Some of these were related more directly to the grounding of the MAX. In fact, it could reasonably be argued that most were. COVID-19 exacerbated the problems, now that passenger demand fell by as much as 95%.

The MAX was grounded globally March 13, 2019. Purchase agreements generally allowed the customer to cancel the contract if delivery is delayed more than 12 months, provided there isn’t an “excusable delay.” Pandemics typically fall under an excusable delay. Grounding by regulators depends on the language in the specific contracts.

Cancellations since January

Below are the cancellations of the MAX since January. Airbus so far hasn’t reported any cancellations of the A320 family.

Oil prices

Oil prices for West Texas Intermediate (WTI) Crude briefly fell to a negative figure Monday. This means producers had to pay buyers to take the oil. (It’s worth noting Brent crude prices remained in the $30/bbl range.)

Below is the market price in the WTI Futures May 2020 contract (CLK20).

And the June 2020 contract (CLM20):


On April 20, the price of the May contract became negative for the first time in history, while the June one stayed within normal levels.

The last trading day for the May 2020 contract was April 21. The physical delivery of oil for that contract is during the month of May.

It is standard for trading to effectively conclude on the day prior to expiry, which was April 20.

Market participants usually exit their positions on that day. Because of storage capacity shortages, very few people were willing to take delivery of crude oil in May.

The supply-demand imbalance in the market led to an extreme price movement.



59 Comments on “HOTR: Airlines, lessors cancel ~250 MAXes since January

  1. IMU:
    WTI futures ( for ~May delivery ) fell below freezing.
    Not “producer @ the well” pricing.

    The way how futures are handled today shows no tangible value add. Just Profits from speculation.

    • It depends. Analysis has indicated that at times oil futures are driven by specualtion and at other times by fundamentals.

      • Oil prices did not go negative, Future Contracts did.

        And yes its now speculation, legalized gambling

        At one time you had to have Storage capacity for your contracts, now you don’t. Unrestrained capitalism at its best (which then requires a tax payer bailout as it impacts the economy per the Mortgage garbage)

        When the regulations go that turn it from a market regulatory mechanism that has a legitimate purpose to Legalized Gambling.

  2. The unique situation of the MAX means that in these very difficult time it is in an incredibly vulnerable position. I would expect a slow avalanche of cancellations to continue as operators and lessors take actions to reduce their liabilities as much as they can.

    Having said that I don’t think any other product or OEM are immune. The biggest risk to the loss of orders or the foregoing of aircraft ready to be delivered is bankruptcy of the airlines. I would guess that all parts of the industry are looking at ways of enforcing contractual obligation in the softest manner possible.

    • Generally agree, its going to affect all, Boeing gets it first due to their unique ability to created a disaster out of success (or as it was put in the Miami/Dallas game, they snatched defeat from the jaws of victory) .

      But in this situation you can’t enforce a contract on a dead man.

      Airbus and Boeing may not give money back but they have no leverage on belly up. They will accept the best deal they can even if its a really bad best deal.

  3. Very surprised we have not seen masssive cancelations, which I believe, the COVID-19 excuse help reduce, but still doubtful it this is the End a the Cancelations.

    • True, but when there is maybe about 5000 orders for the plane, this is approaching nothing like mass cancelations.,…

  4. I’ve heard reports Airbus is saying that their contracts don’t have force majuere. It seems that is one of things customers give up in return for discounts . Indeed if part of a discounted order is cancelled then the airline might have to repay part of discount for the planes in service.

    • Airbus seems to have been on the “lets talk” side of coping most of the time. .. with one exception. Skymark.

    • There was an report about Easyjet. A major stake holder wanted to cancel an Airbus order but the CEO said it would be insane expensive. Discounts for already delivered aircraft had to be repaid and Airbus could request money for canceled aircraft.

      It was explicit mentioned that force majuere is mentioned within Airbus contracts but as no show stopper.

  5. Consequently the leasing rates of extra inefficient old airliners should rise, as they are the best means to burn as much fuel as possible and thus make money even without any passengers on board, right?

    Irony aside, if fuel prices remain this low and at the same time there might be restrictions for a minimum distance between passengers, could this bring huge, inefficient planes with big surface, such as 380, 340-600, 747-400 back in service?

    And who still needs new planes if the main argument to buy them was fuel efficiency?

    • Swiss will return to service with A340-300 and will store its newer 777 longer because the Airbus is smaller.

      Due to comparable seating Lufthansa is still retiring A340-600 for A350-900.

      • I’ve read in different places that maybe the ultra-discount flyers might try one of these approaches with the super jumbos. Ultimately, this will be determined by economics influence by a new Covid paradigm. For example maybe 300 filled seats on a plane with 600 seats. Sounds strange, but I just heard an airline CEO on CNBC. If they fly at 5% capacity they can’t stay in business even with as much money the US Treasury can print. Something’s go to give.

    • ChrisA:

      Lets see, your 737-600 Burns a 1000 gallons at $1 a gallon

      Your 737-800 Burns 800 gallons at $1 a gallon.

      How does burning more fuel saves money?

      So no, leasing rates for older airlines will not rise.

      • he might have had something in the vein of “Rolling coal” adapted to the airline industry in mind 😕

    • I think maintenance costs would be a key driver. IIRC that’s what killed/is killing the a340NG (if you could ever really call it alive) and with 744 they have to be reaching heavy checks or expensive components due to age. I think the a380 is just so horrifically expensive to fly it wouldn’t make sense, as Alan Joyce said he could fly 2 787s back to back and be ahead. In that logic they would fly equally empty smaller planes with greater frequency. It could maybe be a boon to a340-300s and 777-200s though given volume and reasonable cost competitiveness, but these birds are old too. The contra issue is that people who will be willing to fly will expect cheap tickets, so maybe if airlines continue flying cargo flights on 777/a350/787 maybe they offer limited cheap tickets? Not sure if nav/landing fees would jump as soon as pax are added tho. This all assumes travelers have anywhere to go in the war to medium term which seems up for high debate.

      • “Alan Joyce said he could fly 2 787s back to back and be ahead.”

        To the tune of how much further rebates from Boeing?
        then the comparison wasn’t really apples to apples, was it?.

      • They could load up the cargo hold and put 3 pax in every second (Seat A window , E mid row , I window ) row with light weight cargo on the seats in front and behind, then let the market decide the price of the seats. Some might pay x6 for those seats instead of paying x20 for a biz jet seat.

  6. Depending on how you view it, imo the coronavirus crisis is a huge relief for Boeing. A huge sum of federal bailout is tabled specifically for them and boeing even gets to choose which strings gets attached, repackaged their tax relief and many more without facing any drawbacks from EU or WTO.
    Losing 10%—20% of orders in exchange for such favourable relief is possibly the best bargain to date…

  7. Interesting Air Canada cancelled 11 of it’s 737s. It’s got the olds A320s in the world that in reality are flying junk. With 30 already produced 737s I guess they are now stuck with a very messed up fleet.

    • Air Canada is maintaining it’s orders for the MAX8. It cancelled 11 orders for the MAX9. It still has a sizeable fleet of somewhat newer A321’s (and a lot of A223’s on order as well). The A320’s will be leaving.

      I think they have joined the crowd of thumbs down on the larger MAX and I expect them to either buy more used 321’s when traffic recovers or possibly make a large buy of A321NEO to replace some Rouge 763’s.

      • Looks like the AC 767s are going to the scrap heap. AC is retraining the pilots on other planes.
        I guess it depends of AC buys Transat, they will end up with more 320/321s

        • In a twist this frees up 767 for Freighter conversions and reduces Boeing able to sell new 767F.

  8. Regarding Airbus cancellations – Faury gave German weekly Der Spiegel an interview last week saying the following on the subject:
    * A320 production will be reduced to 40/month – compromise between keeping processes and supply chains going while not building too many white tails
    * There will be white tails produced in 2020 at least.
    * Hope that defense contracts will counter the steep decline in commercial business

    The bit about white tails means that at the very least, airlines will not take delivery as planned in 2020.
    The first (already-painted) known white-tails are going to be four A320neo and two A321neo already built for delivery to Air Asia Malaysia, according to Reuters:

    There is a source for Faury’s comments, but it’s in German *and* behind a paywall…

  9. “Pandemics typically fall under an excusable delay.” that’s an interesting statement Scott.

    The one problem I see with that is where an airline perhaps has a delivery date of today, Boeing still can’t actually deliver a MAX that is certified for flight.

    The 737-7 test aircraft last flew on April 2 it appears, I can’t see certification flights happening just yet.

    Then there’s the problem of wiring bundle separation, presumably all MAXs built from now on will be with the new spec wiring locations, but have the FAA signed off on that yet ?

    If the MAX grounding was lifted almost immediately how quickly can Boeing make those modifications to aircraft it has already built in order to be able to deliver them to customers. It seems to me Boeing are in a very sticky position, the only people who are going to profit from this are the lawyers.

    It’s also a little difficult to use a Pandemic as an excuse not to deliver an aircraft that has already been built, the big problem here is that the MAX still hasn’t been certified to fly, until it has all the rest is moot.

    • You miss the nuance of this.

      Those aircraft that are certification’s delayed fall in one category.

      After re-cert, then they fall under the Pandemic guidelines.

      So right now we have (450? built, forget how many delivered that they don’t have to pay for.)

      But as soon as Boeing starts building, then the delayed clause is not relevant, Pandemic as not in Boeing control kicks in.

      That is all nebulous as airlines will be a mix of how they deal with it and Boeing production is going to be low anyway.

      The already built may never fly or re-sold at huge discounts.

      Right now there simply is no market. That will change but the market is years away from any numbers.

    • JakDak: “Pandemic” was specifically in the purchase agreement I reviewed as an excusable delay.

      • Thanks Scott.

        It’s interesting as it would still have to be relevant to the specific case.

        Is the pandemic actually causing a delay in delivering MAX aircraft to customers, if COVID-19 hadn’t happened would the MAX have been certified yet, I thought BA had been looking to the end of May for certification before this all happened ?

        It would be good to know just where Boeing, and the FAA are on the road to certification. Has the FAA approved the wiring bundle separation that Boeing have decided on ? Have they scheduled the certification flights ?

        • Having the unfortunate experience of dealing with the legal system a few times, my guess is the whole thing has three split lines to it.

          Clearly the MAX failure on certifications falls on Boeing. So that entire peirod before Covd-19 is clearly on them.

          Then you have the Covd-19, but still not MAX certified, so the MAX certification’s issue would prevail.

          Then lastly you have certification’s (some day) and after that, the Pandemic aspect kicks in.

          That would have a sub set of Boeing mfg, airlines not taking the aircraft, then next up refusing etc.

          Realistically I believe they would work it out. There could be deals that stretch for 10 years.

          Then you have another aspect of the built. How free is Boeing to offer those up to non original buyers?

          Offer delivery, then refused?

          Or are those cancelled (depends on who did what) and they re Boeing to offer up.

          And a smaller sub set of already delivered and were in service (more do we want to fly these when most of our fleet is NG?)

        • Jakdak, Boeing has performed the wiring separation on several stored aircraft in order to develop a detailed proposal to the FAA, including mechanic instructions since airlines will need to modify their existing aircraft.

          They estimate one week per aircraft, but this will be done concurrently with other storage removal tasks, so not a significant delay, especially since airlines will be in no hurry for delivery or resumption now.

          They’d been working on this in advance as a backup for the likelihood of the NG argument being rejected. I’m sure they will also pay the costs.

          Certification flights still expected in May, if travel of necessary personnel permits.

          • Boeing can move people around on private jets, so I don’t see the travel issues the rest of the world has affect that.

            FAA personal can be moved that way by Boeing as well though I assume precautions taken for sanitation of aircraft, test of flight crew.

          • Reports are that FAA and NTSB are under stay at home orders, to the point of suspending field investigations and responses. Also personnel from other world regulators may be involved, or may wish to be involved. Hopefully restrictions will ease before the certification flights are scheduled.

    • @JakDak

      “the only people who are going to profit from this are the lawyers.”

      Don’t be so pessimistic, you forgot about Boeing execs! 😉

  10. The reality is that there is no single approach or answer as no airline is in the same boat as others (you can probably group them in divisions of close to the same)

    Due to the MAX issue, airlines committed to keeping or extending leases of older aircraft (NG for the MAX).

    That does not mean suddenly a Classic has any value. It still burns more fuel, its more maint intensive and costly to operate.

    Lufthansa is retiring the 747-400 because it has 747-8I (either owned, leased or some combo).

    Some airlines will go bankrupt and all contracts are off.

    So you see 767s being retired, 757s will be in that group. 787s /A350 will be parked until they are needed.

    Where A330CEO falls in this? A340 are being retired. Unique as far as I know Airbus is on the hot seat for those due to the language of takign them back if they did not work out.

    Each Airline is going to make its best attempt at calculating the approach will be and negotiate with Airbus, Boeing or the Leasers or if they own the aircraft outright.

    You see the same in fleets. Delta like the A330/A350 a lot, United and American the 787. Each tunes its fleet to what it thinks works best.

    • I called this one a few months ago. Delta buys cheap, and what could be cheaper than unwanted planes that have been grounded for a year, currently painted in a customers livery who won’t be around in June? This is likely the deal being worked and depending on demand by other carriers I wouldn’t be surprised to see a few more a330neos or possibly 787-8s come their way. Their MD fleet likely will never come back, so this is a win for Boeing and Delta. I’d look for Southwest to be interested in a similar deal on their oldest -700s as they May upguage to more MAX-8.

      • That sort of deal only works if Boeing has a better credit rating and easier access to capital than the airline who wants to trade in its used planes.
        That not may be the case for Boeing right now.
        Until very recently Southwest was scouring the world for used 737-700s and if they now offload planes worth ‘nothing’ that cant make any financial sense to spend up big on brand new planes in a time of low fuel prices…its like a person trading in a car , its the difference in price thats important and it cant possibly make sense to be using your funds on new planes when staying in business over the next 18 months is challenging. Boeing supplies Southwest competitors too and will have to find its own way

    • ref: article “Air Force: Boeing can fix flawed $44 billion KC-46 tanker”

      I love these “gilding the turd” rhetorics.

      “There are camera systems flying out there today that work, so I have high confidence that the design has got high, high probability of working,”

      Yes, on incompetent socialist jobs programme new to the fieled Airbus MRTT 🙂

      that seem to indicate that Boeing has no solution yet?
      ( beyond buying from Airbus Military’s supplier.)

      • Boeing will come up with something comparable to the MRTT vision system. Probably not identical to avoid patent infringement. The existing Boeing system was developed by Rockwell-Collins. That collaboration has produced several problems for Boeing (MAX, KC-46, Starliner, all software/Collins related), so they are bringing in outside experts now. Perhaps they will restore some of that business to Honeywell.

      • In the new LIDAR system Boeing has proposed, there is a conditional rider to extend that system to autonomous refueling. The new system will have the needed accuracy. USAF has already earmarked $55 million for development and testing of autonomy. Boeing is paying for the LIDAR.

          • I don’t usually comment on the Uwe missives.

            If you are close enough with the equipment to see a LIDAR (which is not visual spectrum ) then the emitter aircraft is toast anyway.

            Dang, and they use fuel to deliver fuel, must be horribly flawed.

          • Yes, the LIDAR system uses 3D flash emitter & camera with something like 10 to 30 degree divergence and 50 m range. Orders of magnitude less power and coherence than a laser pointer. Extinction coefficient for low-power LIDAR in atmosphere is 1/100 at a few km.

            A single flash frame entirely resolves 3D space by time of flight methods. Well suited for EMCON and SOAR operations.

          • reflective range is distance^4
            detective range is distance^2

            radar basics.
            comprehend the difference!

            Human visible or not is completely irrelevant.
            What counts is “sensor visible”.

          • Uwe, the emissive power of the LIDAR reflections is comparable to the infrared emissions visualized by night vision goggles. So if the enemy can see the refueling operation with night vision, they could see the LIDAR as well. Apart from that there is no greater risk associated with LIDAR. TW has it right.

  11. Out of curiosity what happens to BFE if an airline for which a Max, a330neo etc that is built doesn’t take it? Likewise for white tails, do they get built with just a shell, flight deck and overhead bins/PSU? I can imagine the install process being easier on a 737/a320 but once you get to bigger planes it becomes an expensive proposition to refit cabins for a new operator, especially if it was a cheaper/cramped/bare bones setup that few would operate. Likewise for an a320 with engine options, how do they determine what to hang on a whitetail?

    • BFE especially IFE systems seem to age at a prodigal rates.
      Dimensions of this minefield could be observed during the 787 delivery delays. a 3..4 year old IFE system is no longer state of the art. ( contrast to airframes: mid 60ties is still up to snuff 🙂

    • @Giblets: The only ME airline taking delivery of a 787-10 in March was Saudi.

    • So the plane originally sold for about 152 millions.

      I they discounted another 10 millions, the price looks good for what they saying the B787 are selling for.

  12. As a big % of world airline fleets are leased and airline revenue is Covid-19 cut by 90% they will default on lease payments pretty soon unless given huge loans from their goverments which many have but that might only cover salaries and a bit? The lesepayments part that is a function of flights hr/cyc is down to zero but a big chuck of fixed monthly fees remain.
    Are leasing companies getting gouverment loans as well or they might qualify as banks and can benefit from the huges increases in money created in the system by the central banks “i.e. banks printing their own electronic money without serial numbers…”

  13. As noted prior, its a mixed bag as to who wants to do what.

    Cancelling due to the delays is an option and payments back in that case would be a strong if not slam dunk court case.

    That said, Timaero trying to say its value on the 737MAX is zero is wrong, its as viable as an A320 if it gets certified so its not a given and legally unless its in the contract they would get shot down.

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