Continental Defers Boeing Delivery
Continental Airlines Inc. said Monday it was pushing back delivery of 36 narrow-body jetliners from Boeing Co. as an unprecedented industry slump persisted, bringing more bad news for the plane maker.
Houston-based Continental said it would defer the delivery of 36 Boeing 737s scheduled to enter service from 2005 to 2007, representing most of a $2.5-billion order from Boeing.
In a move that also could make production of another Boeing aircraft economically unviable, Continental said it was in discussions to defer delivery of slightly larger 757s.
“We’ve given it all the room we can to see a glimmer of hope for an economic recovery,” Continental Chief Executive Gordon Bethune said. “It’s not a prudent thing to continue to commit to add more capacity because we’re not making any money with the airplanes we have.”
People are flying, but fares are cheap. The No. 5 U.S. airline and its peers have worked to slash billions of dollars in annual costs as sizable financial losses continue.
The 737, the best-selling aircraft in Boeing’s commercial line, is for short- to medium-range flights.
Boeing is sticking by its targets because the deliveries on the 737s now being deferred weren’t scheduled to begin until 2005, said spokeswoman Sandy Angers.
Continental said it still planned to accept delivery of four 737s in the fourth quarter and 12 next year. It will use them as replacements for older jets.
But beyond that time, some industry experts said other big airlines, still amassing large losses, are likely to follow Continental in deferring deliveries, while low-cost carriers such as JetBlue Airways Corp. keep ordering planes.
“Major airlines continue to retreat; discounters continue to grow,” said J.P. Morgan analyst Jamie Baker. “Continental’s deferrals are likely welcome news at JetBlue, which will be introducing its second fleet type just as Continental suspends its 737 deliveries.”
In what could be a signal of things to come for the 757 jet, Continental said it is in talks with Boeing on delivery terms of all 11 of the 757-300s it has on order.
Delaying delivery of those plans could drive down production of the 757 to well below one a month, making it difficult to build the model profitably, analysts said.
Boeing has just seven 757 orders beyond the 11 placed by Continental and has not booked a new order for the model since December 2001, according to the manufacturer’s Web site.
In recent months, Boeing has been largely left out of some high-profile aircraft orders, including two from Dubai-based Emirates Airline and Qatar Airways. Its defense business has also been under a cloud as the federal government investigates alleged use of a competitor’s proprietary documents in bidding for big rocket launch contracts.
Continental said it would retire 19 MD-80s and 737-300s during the fourth quarter and next year. It plans to retire the rest of its MD-80s in January 2005 and expects its fleet to shrink to 354 aircraft by June 2004 and 348 by June 2005.
Continental shares rose 26 cents to $15.40, while Boeing shares dropped 60 cents to $34.58. Both trade on the New York Stock Exchange.
