Not Much Good News in Boeing's 2020 Report
Boeing has pushed back the expected delivery of its planned 777X aircraft to 2023 as the Covid pandemic takes its toll on the widebody order book. This is the latest issue in the fraught 777X program, which launched with great fanfare at the beginning of the last decade with orders from the three big Persian Gulf carriers.
But the world has changed since 2013. Boeing said it delayed the aircraft’s delivery date due to regulatory uncertainty, the effects of the Covid pandemic on international travel, and after input from its largest customers. The company is making changes to the 777X’s software and parts of its airframe, after discussions with regulators, CEO Dave Calhoun said during the company’s fourth-quarter and full-year 2020 earnings call last week. “Covid-19 has had a significant impact on passenger traffic, particularly international longhaul routes serviced by large widebodies such as the 777X, which has shifted the anticipated replacement wave and overall demand for widebody airplanes to the right,” he said.
Still, Boeing is committed to the type. It estimates that the world’s airlines will need 8,000 widebody aircraft over the next 20 years, and 1,500 of those will be for an aircraft of the 777X’s size. Boeing said, however, that it took a $6.5 charge against the 777X program last year. With the delay to 2023, the aircraft will enter service almost four years later than originally planned.
In a bit of good news, the European Union Aviation Safety Agency (EASA) approved the 737 MAX to operate in European airspace. The bad news? Boeing has 410 undelivered 737 MAX aircraft waiting to go to airlines. Since the FAA re-certified the aircraft in November, Boeing has delivered 40 737 MAX aircraft. It may have to re-market some of the backlog, Chief Financial Officer Greg Smith said. Production of the 737-family aircraft will ramp back up to 31 aircraft per month.
Production of the 787-family, however, will be about five per month, with manufacturing consolidated at the company’s facility in South Carolina from March. Boeing has about 80 undelivered 787s. The company is conducting inspections of 787s it has already built for issues with build-up on the joins of the fuselage, Calhoun said, but he noted no safety-of-flight issues have been uncovered.
But the larger problem for the 787-family, as with the 777X, is that airlines have all but stopped longhaul international flying. International travel is down 88 percent, Calhoun noted. IATA expects the industry to recover to its 2019 footing only by 2024.
This, along with the company’s engineering resources devoted to the 787 and the 737 MAX issues, has all but cancelled the New Mid-market Aircraft (NMA) project, Calhoun said. The company still is exploring a clean-sheet aircraft design, but not in the context of the NMA. The new design would likely feature conventional propulsion systems — Calhoun noted that hydrogen propulsion isn’t feasible in the near term — but with a radically different airframe. “Differentiation at the airframe level itself is really, really important in the next run,” he said.
But when asked about the Airbus A321 XLR occupying the niche once served by the 757, Calhoun said, “Over the near term, it is what it is.” The company is confident its full portfolio of aircraft will satisfy the market, he said, rather than focusing on a single type.
Boeing’s backlog is healthy, with 4,000 aircraft worth $282 million, Smith said.
Boeing’s defense business continued to be stable, especially for U.S. government sales. But Calhoun noted that governments struggling with Covid relief packages could scale back defense spending in the coming years. Boeing Defense, Space & Security reported fourth-quarter revenues that were up 14 percent from 2019 to $7 billion, but full-year revenues were essentially flat at $26 billion. Operating margins at the unit were 7.4 percent for the quarter and 6 percent for the full year.
This was a marked difference from the Commercial Airplanes unit, which reported revenues down 37 percent from 2020 to $4.7 billion for the quarter, and down 50 percent to $16 billion for the full year. Commercial Airplanes reported a negative 162 percent operating margin for the quarter, and negative 86 percent for the full year.
Company-wide, Boeing reported a record loss of almost $12 billion for 2020. Quarterly revenue was down 15 percent compared with 2020, to $15 billion, and down 24 percent to $58 billion for the full year.
In Other Fleet News
- Canada’s Flair Airlines placed an order for 13 Boeing 737 MAX aircraft. The 737-8s will start to join Flair’s fleet of 737-800s early this year, the airline said. Flair’s 737-8s will be configured with 189 seats and will be leased from 777 Partners. The airline says it will deploy the new aircraft on transcontinental routes in Canada and are part of its plan to grow to 50 aircraft within five years.
- Frontier Airlines new Airbus A320 NEO-family aircraft will be powered by Pratt & Whitney’s GTF engines. The airline plans to take delivery of 134 A320 NEO-family aircraft from next year, all powered by GTFs. Frontier’s order consists of 49 A320 NEOs, 67 A321 NEOs, and 18 A321 XLRs. The agreement with Pratt & Whitney includes maintenance support for the engines.