Exclusive-Allegiant expects fewer aircraft from Boeing as US planemaker faces quality issues

By Rajesh Kumar Singh

CHICAGO (Reuters) -Low-cost U.S. carrier Allegiant expects fewer aircraft deliveries from Boeing (NYSE:) this year, its president told Reuters, as the planemaker grapples with the fallout of a frightening incident last month when a cabin panel tore off of a 737 MAX 9 jet mid-flight.

The Las Vegas-based airline was scheduled to receive 24 MAX planes in 2024, but Allegiant President Greg Anderson said it is working on the assumption that it will receive closer to 12 aircraft this year.

“We are in regular dialogue with Boeing on this,” he said in an interview on Tuesday. “We can manage through it as long as we have an orderly delivery cadence from Boeing.”

The planemaker has scrambled to explain and strengthen safety procedures since the Jan. 5 incident. Its production rate has been capped by regulators and closely scrutinized by lawmakers and customers. That has had a ripple effect on the industry, as several air carriers have said they are considering adjusting schedules or keeping older planes in service longer.

In 2022, Allegiant placed an order for 50 of Boeing’s best-selling single-aisle 737 MAX planes, rejecting offers from traditional supplier Airbus. It was scheduled to take delivery of 10 of the jets in 2023, 24 in 2024, and 16 in 2025.

Allegiant has traditionally relied on less expensive second-hand planes. With the introduction of MAX planes, it expected to launch new routes and reduce operating costs.

The carrier has yet to receive its first MAX aircraft, said Anderson, adding the delivery is now expected in the coming months.

The head of the U.S. Federal Aviation Administration (FAA) on Wednesday asked the planemaker to develop a comprehensive action plan to address “systemic quality-control issues” within 90 days, raising fresh questions as to how long the cap on production would last.

The delays have prompted Allegiant to reactivate a few of its used Airbus A320s that it was planning to retire to boost capacity during summer peak flying season, Anderson said.

Allegiant plans to boost capacity by 2% to 6% in 2024 from a year ago, and the reactivation of older jets means the delays “shouldn’t impact our capacity plans,” he said.

Boeing’s problems, however, have left its customers in a spot.

Ryanair last week said the European carrier might have to remove some flights from its summer schedule because of Boeing’s delivery delays.

The cap on MAX production has also raised concerns at Southwest Airlines (NYSE:), one of Boeing’s loyal customers, according to a person familiar with the discussions. Last month, the Dallas-based airline said it expected to receive 79 MAX jets this year.

If Boeing fails to deliver all those jets, the company could be forced to defer the retirements some of its older and less fuel-efficient planes. Southwest did not immediately respond to a request for comments.

The planemaker’s troubles have also sent United Airlines scurrying for options. United last week said it was looking at options to mix some additional Airbus product into its “Boeing heavy fleet” and extend the life of some planes that were ready to retire.

Allegiant’s Anderson said the safety culture at the U.S. planemaker has “rightfully been brought into focus,” adding a stronger Boeing will be good for the industry.

Allegiant is using its own experts as well as engineers from Lufthansa’s aircraft maintenance business, Lufthansa Technik, to ensure that the planes leaving Boeing’s factory are of “the quality and standard they need to be,” he said.

“We’ve heightened our approach in that area,” Anderson said.