New Problems For Existing 737 Planes That Have Been In Storage.
QUEST: And we are off to the races. Today, the trading day has begun in New York. A warm welcome to FIRST MOVE. U.S. stocks are up and running and exactly as predicted, they are down. Well now, as you can see, the Dow is off over half a percent. We will expect the NASDAQ to be down even more. The NASDAQ was lower by one percent in futures trading, and so that's how we are at the beginning. Now, let's see 1.5 percent for the NASDAQ. Now, let's see how it moves further as it goes on. Intel is tumbling on weak outlook. They may have to outsource its next generation of chips, which will be fairly dramatic for a chip making company. And the big challenges for investors next week, four FAANG stocks are reporting. You've got Apple, Amazon, Facebook Alphabet. The Federal Reserve holds a policy meeting, and of course, it's all the question of stimulus. Today though, is the F.A.A. has ordered emergency inspections on Boeing 737 NG -- next generation -- and classic models. They're the ones, the majority of them that are flying. The MAX of course, is grounded. They've been in storage as many airlines have decided to stop or have been forced to store planes because there's simply not demand. But apparently these inactive planes have had problems in the engines. Pete Muntean is with me from Washington. It's all to do with the fifth stage bleed air check which apparently, because the planes have been stalled for more than seven days. Well, what happens? What's the risk with the fifth stage bleed air check?</s>PETE MUNTEAN, CNN AVIATION CORRESPONDENT: Well, it's a tiny valve within the jet engines, Richard, that are supposed to automatically close eventually. But what's happening is, these planes have been sitting for so long, the valves have corroded. They've rusted. And that could cause jet engines to fail in flight, essentially turning a 737, a hundred and fifty- thousand-pound airplane into a glider, possibly one of the worst possible scenarios for a flight crew to experience. You know, this emergency action by the F.A.A. is huge in scope. It affects more than two thousand 737s registered here in the United States, and what's so interesting is the F.A.A. says, this is an unintended side effect of the pandemic, just like an old car that's been sitting, problems start to creep in. That is exactly what's happening in this case. I want to read you part of this emergency action by the F.A.A., which says these problems can cause compressor stalls in the jet engine, dual engine power loss without the ability to restart in the air, which could result in a forced off airport landing, a very serious situation for any flight crew. The F.A.A. is ordering the airlines who fly 737s to go and inspect airplanes that have been sitting for longer than a week and that has a lot of them. Airlines have parked planes in every nook and cranny, closed runways and taxiways at airports across the country. You know, people were looking for reasons to not fly because of the pandemic, and now they just found one more reason to skip commercial air travel -- Richard.</s>QUEST: So they obviously just -- I mean, one wonders how they even thought to look at the particular thing to check it. It's such a small piece of the aircraft, but they did and by all accounts, it is relatively straightforward, repair or at least maintenance to do.</s>MUNTEAN: Yes, relatively straightforward. Although, the incidents were relatively large, at least large enough for the F.A.A. to issue this order. They said that there were four incidents in a row, which ended up leading to this emergency action, which is very rare for the F.A.A. And the scope of this is so rare as well. It will be a straightforward fix for the airlines. They've been staying on top of this. I have seen United's long term storage facility at Dulles where they've been looking at airplanes trying to keep them safe and ready to go. Now, they just have one more thing to do.</s>QUEST: And I have to -- I do love that phrase off airport landing. I mean, talk about the masters of the understatement at the F.A.A. It is a serious matter, Pete Muntean. Finally, should we expect other issues and problems as aircraft are brought back into service?</s>MUNTEAN: Well, there's so many airplanes that have been parked and airlines were sort of banking on this recovery to come that they have not quite seen. They've not seen the V-recovery that they had hoped, but it's not just 737s that are parked. There are 757s, 767s, 777s that I saw in just my visit at Dulles, where there were only a few dozen airplanes parked.</s>MUNTEAN: But we know that situation is repeated at airports across the country. So no doubt that this could creep in as a problem in other airplanes. You know, when airplanes sit, it's a problem, especially in moist environments where things can rust and cause corrosion, and that can be really serious. That's why we see airplanes parked more often in desert, dry environments, big boneyards like in Mojave, California and in Tucson. So this is an issue because the airlines have had to find space to put these airplanes away, sometimes not ideal places.</s>QUEST: Pete Muntean, thank you. Pete is reporting from Washington, D.C. The announcement on the 737 came before my interview with Gary Kelly, which I did last night, the CEO of Southwest, which is somewhat unfortunate, because Southwest has an all 737 fleet. So obviously I would have asked him about it, but it happened. That interview was last night, so that's why he doesn't answer in this particular interview. We did talk about the recovery that was taking place that has now stalled, and I asked him what this meant for Southwest.</s>GARY KELLY, CEO, SOUTHWEST AIRLINES: Certainly not welcome news. We were on a really improving, a very nice trajectory, really a line of sight to the end of the year if things kept continuing to getting back to breakeven cash flow. And, yes, we've lost hundreds of millions of dollars of momentum here in the third quarter. So I don't think we've taken a step backwards, we've just lost momentum. And I think it's, you know, directly correlated with the spike in COVID-19 cases here in the United States. That's very disappointing to see that. And, you know, you can see the direct correlation with travel and future bookings.</s>QUEST: The issue of air travel, passengers still don't believe, no matter how many times you tell them about HEPA filters, and the like, and passengers are still worried about flying the middle seat, and so forth, aren't they?</s>KELLY: I think there's some degree of anxiety there. But I think more important than that is people who travel for a purpose, they want to go places. They want to be able to do things when they get there. And you look around the world and there are no sporting events. Businesses aren't having meetings. There aren't conventions. And a lot of entertainment venues are either closed or very limited. There are quarantines in place in certain states. So all of that, you know very much provides a deterrent. That's on the more consumer side of travel. Then on the business side of travel, large corporations, in particular have travel bans in place. So, I think we need to have very modest expectations in the near term here about travel until we get to the point where there's a vaccine or therapeutics.</s>QUEST: Finally, Gary, what's your gut telling you about the situation? When all of the numbers have been put in front of you by the CFO, and the COO has given you the operating numbers, and you've seen the revenue forecast, and you've digested it all, what's your gut telling you?</s>KELLY: Well, I think in the end, I feel like there's every reason to be hopeful with Southwest Airlines. We are the strongest in the industry. We came into this crisis with the least amount of balance sheet leverage we've had in our history. We have plentiful levels of cash to see our way through. We're still in investment grade credit. We have outstanding service that our people offer every single day. We have very high brand rankings from our customers and we have low cost on an operating basis in what is a very low fare environment. And I think it's going to be this way for a long time. So we're very well prepared for the crisis. I'm confident, I'm encouraged, and I'm hopeful what is -- what we also know is that this too shall pass. There will be a vaccine. We will defeat this virus. We can put a man on the moon 50 years ago, we can beat this coronavirus. So we just need to be smart and manage our way through this.</s>QUEST: We needed some optimism on a Friday as we go into the weekend. In a moment, after the break, more optimism from the former head and CEO of Honeywell who has written a new book that is rapidly becoming the go-to and well, the definitive word on short termism versus long termism, and how the CEO needs to negotiate both. After the break there. We'll discuss "Winning Now, Winning Later" in a COVID-19 environment. David Cote is with me after.