Boeing Reveals New 787 Delays But Suggests Delivery Resumption In Sight

Boeing’s 787 production-quality work required to satisfy FAA concerns and resume deliveries includes more extensive repairs than previously understood as well as some work on every aircraft, the company confirmed Jan. 26, adding that notional schedules that have some customers receiving aircraft in 8-12 weeks reflect these developments. 

“In the fourth quarter (Q4), we determined that the activities required to resume deliveries and the rework that will be needed on each airplane in inventory will take longer than previously expected, resulting in further delays in customer delivery dates,” CFO Brian West said on the company’s 2021 Q4 earnings call. “We resolved many of the nonconformances and we’re finalizing our work on the remaining items. We also continue to focus on fulfilling the requirements and expectations of the FAA, and we’ll follow their lead on the timing of resuming deliveries.” 

Boeing has been working to quantify and fix a range of 787 production-quality issues since late 2020. The company halted deliveries in April 2021 to focus on developing inspection and rework processes that satisfy the FAA. Among the outstanding issues are correcting shims, or spaces, in the areas around doors.  

“We previously described a pretty labor-intensive rework solution on the door surrounds,” West said. “[We] determined that this rework was going to be needed to be performed on all of the airplanes inventory.” 

Boeing has shied away from providing estimates for when it expects to earn FAA approval needed to re-start deliveries. American Airlines CFO Derek Kerr said recently that the airline expects to take delivery of its next 787 in mid-April, adding that the date has been “locked in” for several months. 

Boeing CEO Dave Calhoun declined to comment on a specific delivery-resumption date but suggested that American’s take is accurate.  

“The customers know everything that we do,” Calhoun said. “We share the same regulator. They are in our factories looking at the airplanes every day. So they know exactly what’s going on and where it is.”  

“I don’t want to get ahead of anybody with respect to speculating the day we” receive approval, he added. “That’s up to the FAA, and we’re going to let them do what they have to do.” 

Boeing has 110 787s in its undelivered inventory, West said. Its current monthly production rate is somewhere around 1-2 per month. Boeing still plans on boosting the rate to 5/month as demand and its ability to deliver them improve. 

“In terms of getting back to [5/month], we’ve got to first get cleared to deliver, and then we’re going to gradually work our way to a point we’re going to get back up,” West said. “We don’t have the time frame, but we think that the first step is getting the first one out the door.” 

The low production rate and delivery delays led Boeing to take a $3.5 billion non-cash charge and a $285 million in “abnormal costs.” The charges account for the lion’s share of its reported $4.1 billion Q4 net loss. 

News on the 737 MAX program is more encouraging. Boeing is producing 26/month and expects to reach its previously stated target of 31/month “fairly soon,” West said. The biggest potential hurdle is COVID-19-related headwinds such as supply-chain holdups or labor issues. 

“We’ll work our way through that,” West said. 

A decision on the next 737 MAX rate jump does not need to be made quickly, Calhoun added. “We will work with our supply chain transparently to protect upside on rate as we get to the second half of the year,” Calhoun said. “The minute we are ready to do it, we’ll do it. But I don’t want to get ahead of myself on that front. It’s certainly not now.” 

Deliveries of MAXs to China, which recently approved the aircraft to operate again after nearly three years on the ground following two fatal accidents, in 2018 and 2019, should start again soon. 

“China is preparing for their MAX return to service and for delivery, and we have set up a plan that allows for that in the first quarter,” Calhoun said. “I don’t think this is necessarily in the geopolitical realm as much as it is in the needs of the customers and operations inside of China, he added. “They went through the [certification] process. They reauthorized the airplane to fly. The airlines are warming up the airplanes they already have.” 

Boeing has 335 737 MAXs in its inventory—most of them built when deliveries were halted during a global grounding that lasted nearly two years, and longer in some jurisdictions, including China. The company is projecting that most will be delivered by the end of 2023. Assuming a new-production rate of 26-31 aircraft during that stretch, total monthly deliveries would need to average 40-45 per month to ensure the backlog continues to shrink. The company delivered 245 737 MAXs in 2021, led by June’s 33 deliveries and December’s 32 hand-overs. 

“With production increasing, it will be important to boost deliveries as well in order to reduce inventory,” J.P. Morgan analysts said in a research note. “Key issues for 2022 737 deliveries include the number of planes for China and the timing of MAX 7 certification.” 

West said Boeing is “advancing our development of the MAX 7, MAX 10 and 777X programs,” offering few additional details. Boeing is “working towards reaching type inspection authorization” and official certification flight testing on the newest 777—an effort that has now been going on for more than a year. Boeing still expects to deliver the first 777-9 “in late 2023,” West said.