Airline Post-Election Optimism Tempered By Boeing Woes

The airlines have been celebrating since Donald Trump was elected on November 5. Airline stocks have mostly risen on the anticipation that the second Trump administration will cut regulation.

Airline executives are well aware that under the Biden Administration, potential mergers between Spirit and Frontier, and later between JetBlue and Spirit, were scuttled by scrutiny from the Justice Department. An agreement between American and JetBlue, the Northeast Alliance, under which the two airlines coordinated some schedules in New York and Boston, was also deemed anticompetitive.

Airlines believe the new administration may well look more favorably on airline mergers and partnerships. As Delta CEO Ed Bastian put it in an interview with The Atlanta Journal-Constitution, Trump is a “strong supporter of U.S. airlines and U.S. jobs.”

In another potential positive for the airlines, Melius Research analyst Conor Cunningham told Barron’s that pro-business policies under Trump could “jolt forward” business travel activity in 2025. The full return of the bashful business traveler would bring additional dollar signs to the airlines, while the dollar itself has strengthened since the election, making overseas travel comparatively “cheaper.”

One company critical to the airline business has not been participating in the punchbowl—-Boeing.

On November 15, Boeing (BA) stock reached a 52-week low at 140.29. Financial losses, quality issues, a costly new contract with the Machinists Union and repeated grounding of its aircrafts are among the culprits. As a company, it could be said that Boeing is testing the limits of what “too big to fail” means.

And while airline stocks have soared since the election of Donald Trump, the fact remains that Boeing’s problems have hit its customers bottom line. Southwest, which famously flies an all-Boeing 737 fleet, cites reduced deliveries as part of the reason its profit dropped 65% from the year-earlier quarter to $67 million, or 11 cents a share, this quarter.

American Airlines reported record third quarter earnings of 13.6 billion, it reported net loss of $149 million , or ($0.23 ) per share. While not blaming Boeing for its issues, American Airlines did express irritation with the giant aircraft manufacturer.

American has been waitingfor the largest version of the 737 MAX, the MAX 10, which has yet to be certified by U.S. regulators. Robert Isom, CEO of American Airlines, refused to guess when the aircraft might appear. Isom said, “I can’t go run Boeing — it’s not my expertise, it’s not where I come from. Let’s just get one quality aircraft off the line first.”

The aircraft manufacturer and defense giant has been suffering self-inflicted wounds for more than six years now. This dates back to a pair of crashes of 737 MAX aircraft that killed 346 people in 2018 and 2019.

The FAA grounded the aircraft from March of 2019 to December of 2020. Boeing had to create software upgrades and training changes before the aircraft was approved to fly again. MAX aircraft were grounded once again for three months in 2024, after a window blew out of an Alaska Airlines aircraft.

The grounding and accidents reportedly cost Boeing an estimated $20 billion in fines, compensation, and legal fees, as well as resulting in the loss of over 1,000 orders. Photos of Boeing Field overflowing with undelivered 737 MAX Aircraft were common.

The planes have since returned to service. But meanwhile, the manufacturer has been bedeviled by quality problems, management instability and most recently a machinist’s strike.

While the strike was recently settled, Boeing announced that aircraft production would not resume for ‘several weeks.’ Safety and quality issues on both the 737 line and the much larger and more costly 787 Dreamliner (where South Carolina workers allegedly falsified records) impacted production as well.

Boeing’s problems have a major impact on Boeing’s customers, and perhaps no customer has suffered so much as Southwest. The carrier is offering buyouts and perhaps will move to layoffs as the airline cannot grow as much as it planned.

At Southwest, the airline is planning to cut 2,000 workers from its 2023 total and is offering buyouts to employees in 18 cities. Southwest cites aircraft delivery delays from Boeing as a reason for the reduction in force. According to Bloomberg, “Southwest has said it will receive just 20 new planes this year, down from an earlier expectation of 79.” None of them reportedly will be 737 MAX7s, forcing Southwest to continue flying older aircraft ready for retirement.

Meanwhile, the airline has been under pressure from hedge fund Elliott Investment Management to increase profitability, despite the aircraft delivery issues and costly new labor contracts. Fund representatives now sit on the Southwest board of directors.

Only two manufacturers build the overwhelming bulk of the world’s airliners. Boeing is half of the airliner duopoly , with Airbus now the world’s leading manufacturer.

In another setback for Boeing, this month Iberia Airlines put the first Airbus A321XLR , an extra-long-range aircraft capable of carrying 200 passengers more than 4000 miles, into service.

Boeing lacks an aircraft that can be a direct competitor. Production of Boeing’s narrowbody long range plane, the B757, ended in 2004. Rumors of its replacement by the so-far unannounced B797 or Boeing New Midsize Airplane have remained exactly that—rumors.

Of course, the airlines have just one Boeing competitor to take their business to. Airbus too is also experiencing massive backlogs. But being stuck and having to wait because of a manufacturer’s quality problems is not a formula for a smooth and successful working relationship.

While Boeing is still getting orders from airlines (63 in October) its quality and delivery problems are directly impacting the bottom lines of its customers. And the company’s continuing stock decline may indicate Wall Street is not yet buying a turnaround story.