Boeing called 2021 a “year of transition,” but the company faces steep hills to climb this year with its many crises. But management believes that after 2022, the airframer will be on a more stable footing for 2023 and beyond, just as commercial aviation is expected to rebound from the Covid-19 pandemic.
Chicago-based Boeing has an ambitious plan to deliver as many as 500 aircraft this year, the bulk of which will be 737 Maxes that the company already has built but was unable to deliver when the plane was grounded. More than 180 countries have certified the Max to return to flight, after two fatal accidents grounded the type in 2019. And Boeing is optimistic that it can resume deliveries to China in the first quarter of this year.
China’s aviation regulator has signaled that re-certification may come soon and has updated airlines on new procedures to bring the aircraft into compliance. The country’s airlines have started test flights. “They’re warming up their airplanes,” CEO David Calhoun told investors on Boeing’s fourth-quarter and full-year 2021 earnings call Wednesday.
But the bigger and more immediate problem for Boeing is the fate of its 787, which the company has not been able to deliver for months. The FAA has identified work on fuselage door surrounds that Boeing must complete on the 110 787s in its inventory before those can be delivered. “We will have to complete the re-work on a large number of airplanes,” Calhoun said. “I wish it could go faster, but I can’t accelerate it.”
American Airlines has said it expects to start receiving 787s in April, but Calhoun noted that it is up to the FAA. “They have the same regulator as us,” he said, declining to specify precisely when deliveries may resume. Boeing took a $3.5 billion charge in the fourth quarter for the 787 program, much of that driven by concessions to customers. In addition, Boeing has added $2 billion in “abnormal charges” for the program through the end of 2023.
But the airframer remains confident on the long-term success of the program and will ramp production back up to five aircraft per month when deliveries resume. “We will sell a lot of these 787s for decades,” Chief Financial Officer Brian West said.
The company is also struggling with its 777X program, although management believes that it will meet its delayed target of a late-2023 entry-into-service. The aircraft has amassed 1,800 flight hours in tests. Calhoun said once the type is being flown by customers, the 777X will replace 747s and Airbus A380s as those aircraft are retired.
Boeing is now soliciting interest for a 777X freighter variant to capitalize on the air freight boom, Calhoun said. He did not offer a timeline for when that program may launch, however. Reuters has reported that Qatar Airways is in “advanced talks” over an order for up to 50 777XFs. Air cargo traffic is 7 percent higher now than it was before the pandemic, according to Boeing’s numbers, and that is only expected to grow. The company is adding 10 more freighter conversion lines to meet demand for freighters.
As for a new aircraft, Boeing was non-committal. Boeing has a “reasonably full pipeline” of aircraft development projects, with Max derivatives and the 777X, Calhoun said.
Boeing has come under criticism for abandoning the middle of the market and ceding ground to the Airbus A321 family. Air Lease Corp. Executive Chairman Steven Udvar-Hazy said the company faces a dilemma: Develop a new aircraft now or wait until the next generation of propulsion comes online. Calhoun noted that any new aircraft program Boeing develops would not be dependent on advancements in propulsion as it historically has been. “The airframer must add enough value to make it compelling for the customers,” he said.
Boeing’s $450 million investment in eVTOL provider Wisk is a chance for Boeing to learn about new technologies. But Calhoun does not believe electric propulsion will be feasible for large commercial aircraft any time soon.
Boeing is not facing the same concerns about its supply chain as Airbus is. First, Boeing’s production ramp up — up to five aircraft per month for the 787, 31 aircraft per month for the 737, and three aircraft a month for the 777 — are less ambitious than the Toulouse-based airframer’s. But second, the Max grounding and the 787 delays have given Boeing some breathing room to manage its supply chain. “That’s sort of a double-edged sword,” Calhoun said. “I hate that we have a lot of inventory, [but] on the other hand, it will probably serve us well in what is likely to be a robust recovery.”
Boeing sees two possible near-term supply-chain issues. The first is the shortage of precision casting and forgings among propulsion suppliers. The second is the potential shortage of titanium, if the conflict with Russia, which controls much of the world’s titanium, escalates. ”And as long as the geopolitical situation stays tame, no problem,” Calhoun said. “If it doesn’t, we’re protected for quite a while, but not forever.”
Geopolitical tensions with China also remain a concern and could be an impediment to Boeing’s recovery, West noted. Beyond geopolitical concerns, the company forecasts air travel to recover to 2019 levels by the end of 2023 or the beginning of 2024. Long-term growth beyond 2019 levels is expected within a few years after that, West said.
Boeing reported a $4.2 billion fourth-quarter loss, driven mainly by charges associated with its 787 program. The loss was narrower than last year’s $8.4 billion loss, when the company was mired in the 737 Max grounding. For the full year, Boeing reported a $4.3 billion loss, down from a loss of $12 billion last year. Revenues in the quarter were $15 billion, and $63 billion for the full year.
Boeing Commercial Airplanes reported a $4.5 billion fourth-qurater loss, down from $7.6 billion last year. Its defense business unit reported a $255 million loss, while Global Services reported a profit of $401 million.
