Boeing offers discounts and bulk-buy deals in wake of 737 Max crashes

Grounded 737 Max airliners 
Grounded 737 Max airliners unable to be flown are piling up in storage areas

Boeing is offering huge discounts, bulk-buy deals and maintenance packages to airlines as it fights to hold onto 737 Max orders after the aircraft was grounded following two crashes.

Airlines rarely pay the full price for new aircraft, but experts say the crisis at Boeing in the wake of the safety scandal has driven price cutting to new levels.

Alex Macheras, an airline analyst, said: “Boeing’s worried and so very generous incentives and substantial discounts are being offered.

“Airline executives in South America and South East Asia have told me they’ve been offered deals on small sales that are normally only given on really big orders, ones in the hundreds.”

Boeing has been thrown into crisis by the Max crashes, which cost 346 lives. The jets were taken out of service after the second incident in March, with the losses blamed on a new control system installed on the jets.

Since then the US aerospace giant has racked up huge bills, as airlines demand compensation for jets they cannot use or take delivery of.

The chaos cost former boss Dennis Muilenburg his job and sparked global outrage which led US senators to label the jets "flying coffins".

Insiders describe the company as “haemorrhaging” money. So far Boeing has put the bill for the crisis at almost $10bn (£8.6bn) but this is just the starting point as the company tries to get the Max fixed and back in the air. 

Boeing had been hoping to return the Max to flight by the end of last year. Predictions of a spring return now look optimistic and some major Max customers have removed the aircraft from their summer schedules.

New analysis by aviation economist Chris Tarry calculates that Boeing faces a $1bn-a-month bill until the Max flies again. To try to reduce costs, the company has now halted production of the aircraft. The firm had originally been building almost 50 a month and has run out of room to store grounded jets, stashing dozens in the staff car park at its Seattle headquarters.

With a price-tag of about $120m, the Max is Boeing’s bestselling aircraft with almost 5,000 on order. However, sales have slowed since the grounding and about 200 have been lost as airlines folded or swapped to other models.

One major deal was struck at the Paris airshow last June, when British Airways parent IAG  signed a loose “letter of intent” for 200 Max jets at a rumoured 50pc-plus discount, an almost unprecedented level.

Max in factory
Boeing has halted production of the 737 Max while it tries to get the jet recertified

John Strickland, an airline consultant, said: “Discounting is murky but IAG chief executive Willie Walsh really picked his moment there.

“Having a customer like IAG appear on the order really sent a positive message.”

Mr Tarry added: “The Max is in such a vital market segment for Boeing that everything is negotiable. Discounts normally only seen on launch and big orders are likely.”

With Boeing’s balance sheet under pressure, it is not just discounts that are being offered, according to Mr Macheras. 

He said: “It’s rumoured IAG will pay virtually nothing for its order, with Boeing offering maintenance as well.

“All this has long-term financial ramifications for Boeing but the company is totally focused on the Max - it’s such an important aircraft to the company.”

Boeing said: “We do not comment on our private discussions with customers.”

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