Though it hasn’t been confirmed, a recent order adjustment by Boeing could be a reaction to the halting of operations by Jet Airways.
According to Reuters, reporting on April 24th, Boeing has removed 210 aircraft from its order backlog. This to reflect concerns about customer credit quality. It has also marked an impairment at the Boeing Capital financing unit. Boeing has not confirmed the airline these actions relate to.
Reuters says a Boeing spokesperson would not comment on the airline involved in the order reduction or impairment. But, coming just days after troubled Jet Airways ceased operations, the actions could well relate to the Indian airline. Industry sources believe Boeing Capital financing is carrying 75 orders for Jet Airways, which also has 125 aircraft on order directly with Boeing.
Boeing’s revenue has fallen
For Boeing, its net orders are now negative for March, standing at minus 119 orders. However, Boeing is seeing an influx of wide-body aircraft orders from Europe and Asia. The Boeing capital financing unit is posting a first-quarter 2019 loss of $707 million. For the first-quarter of 2018, the unit reported losses of $326 million. Boeing says:
The change in earnings from other unallocated items and eliminations is primarily due to a customer financing impairment, higher deferred compensation expense and increased enterprise research and development investment.
Overall, Boeing’s first-quarter financial results show a year-on-year fall in revenue, dropping from $23.4 billion in the first-quarter of 2018 to $22.9 billion for 2019. This indicates that Boeing could be seeing the effect of the 737 MAX grounding.
Is there hope for Jet Airways?
Jet Airways has ceased global operations after its lenders refused to provide emergency funds to keep the airline in action. Simple Flying speculated on April 23rd whether there was still time to save Jet Airways. The airline canceled international flights on April 11th. It then suspended all flights on April 17th, after failing to secure interim funding.
Although Tata Group and Reliance Industries have emerged as potential investors, neither has submitted a formal expression of interest, although it is reported that Reliance Industries interest could come as part of a deal with Etihad Airways. Etihad has submitted an expression of interest along with three other interested parties whose identities have not been revealed.
After stopping flights, Jet Airways is continuing to add to its debt without earning revenue. The airline has had planes repossessed, lost vital airport slots, and also lost staff to other airlines. And now, potentially, this latest reaction by Boeing, if it indeed relates to Jet Airways.
Any investor in Jet Airways faces an uphill challenge to overcome the effects of the airline’s recent decline. The Indian airline would need an immediate cash injection. Jet Airways does, however, have a 30-year history of operation, substantial reach into the market, and has good positioning for expansion. The right investor might be able to save Jet Airways and even take the airline to new heights.