Boeing remains confident that internal challenges will not hamper its efforts to get the 737 MAX and 787 programs back on track but suggests that a prolonged trade stalemate between China and the U.S. could present near-term problems.
“We’re still awaiting 737 MAX regulatory approval from China, and the timing of it will affect our 737 delivery plan,” Boeing CFO Greg Smith said during the company’s 2021 first quarter (Q1) earnings call April 28.
CEO Dave Calhoun said Civil Aviation Administration of China (CAAC) approval for the 737 MAX to return is now not expected before the second half of 2021. The country is one of several that have not yet lifted its grounding put in place in March 2019 following two 737-8 accidents in five months. Chinese carriers operated more than 90 of the 387 grounded 737 MAXs and can neither return them to service nor take deliveries of additional ones until CAAC signs off on changes made by Boeing to correct issues flagged by regulators.
“The timing of China’s certification of the 737 MAX will likely play a role in the number of MAX deliveries, and Boeing is making clear today that this is a watch item,” J.P. Morgan analyst Seth Seifman wrote in a research note.
It is not clear how much of China’s scrutiny is tied to the larger political tensions with the U.S., and Boeing executives did not provide details on the country’s review of the MAX. Calhoun cautioned that bigger-picture ramifications are in play than simply clearing the pipeline for 737 MAX flights and deliveries.
“China represents 25% of the global growth in our industry over the next decade,” Calhoun said. “It’s important that we get our fair share of that market, which historically has always been at 50%—a little more when you consider all the widebody activity. We need to get back to that stage. I believe that will happen, but it’s going to take a little time.”
Boeing current backlog lists 143 direct orders for Chinese operators. Lessors will supply more, but getting a steady stream of firm orders from the country’s major airlines is a major contributor to Boeing’s commercial programs.
“China is an important market for our commercial airplanes and order activity from China will affect our future production rates,” Smith said.
Shorter term, the company continues to make progress moving its 787 backlog. Boeing expects to deliver 10-12 787s in April—up from just two in March and none in the four months before that. Inspections and rework on interior fuselage sections caused the temporary pause, but Boeing is getting a handle on the issue and ramping up the pace of its fixes. It still has about 100 in its backlog and expects at least some to carry over into 2022. The company declined to say how many of those aircraft have been repaired.
“You’re not going to see all of them being reworked at the same time,” Smith said. “That’s not going to be how it’s going to work, and that’s not how it is working, but it’s progressing well, as you can see by the increase in the deliveries so far to date. We’re working through them tail number by tail number.”
Boeing is running 787 post-production rework lines in both Everett, Washington—using the original 787 production space—and in North Charleston, South Carolina, the site of the program’s recently consolidated single final production facility. While required rework can vary on a per-aircraft basis, the general pace is accelerating as teams learn.
“It is improving aircraft by aircraft,” Smith said. “As the teams are completing the rework, they are actually coming down a learning curve, so we anticipate that overall cycle time to improve. Right now, we’ve got a schedule lined up with by tail number by month, by customer that gets the majority of the 100 inventoried aircraft delivered by the end of the year.”
The rework is just one factor that could disrupt future delivery schedules. COVID-19 is affecting airline fleet plans, though Calhoun downplayed customer reluctance to take new aircraft as the primary pandemic-related risk to delivery plans.
“It’s not going to be because of a lack of willingness to take airplanes,” Calhoun said. “It’s just going to be because of logistical timing with respect to when crews can get in and take delivery and move them out.”
The company offered no new insight on when the latest 737 MAX issue affecting deliveries and fleet availably will be resolved. Boeing earlier this month recommended that more than 100 aircraft with 21 operators be parked until electrical issues linked to early 2019 production-process changes are corrected.
“We are finalizing the plans and documentation with the FAA to outline the process required for operators to return their airplanes to service,” Calhoun said.
The FAA plans to publish an airworthiness directive April 30 that requires affected U.S. operators to implement Boeing’s proposed modifications before further flight. Other regulators will likely adopt the directive.
Affected operators are confident that the issue will be resolved in short order.
The issue also affects all undelivered 737 MAXs and must be corrected before deliveries can resume. Aviation Week Intelligence Network Fleet and Data Services shows four 737 MAX deliveries in April, a notable drop from the 18-20 per month that Boeing has been averaging since deliveries resumed in December 2020 following the global grounding.
“At this time, we expect to catch up on deliveries over the balance of the year,” Calhoun said.
The 777X program remains on track for a late 2023 entry into service—the revised time line announced earlier in 2021, Calhoun said. “We are making good progress on our flight test efforts,” he added.
Ramping up 787 and 737 MAX deliveries are the two largest drivers in Boeing’s effort to swing its commercial operation back to profitability. Boeing’s commercial revenue fell 31% in Q1 thanks in large part to 787 deliveries falling from 29 in 2020 to two in 2021. Overall deliveries increased to 77 from 50 due to the resumption of 737 MAX deliveries contributing a net of 58 more 737 program customer hand-overs this past quarter compared to Q1 2020. The unit’s operational loss was $856 million, down from $2.1 billion in the year-ago period.
Related Content
