Subscription Required

By Judson Rollins

Introduction 

Feb. 5, 2023, © Leeham News: After last week’s release of the 2023 annual report for Boeing, we undertake our annual analysis of at-risk deals on the OEM’s books.

This year, we also look at Boeing’s deferred production costs in light of the well-documented commercial aircraft production issues. During the company’s earnings call, Boeing CEO David Calhoun and CFO Brian West discussed plans to close its “shadow factories” or rework facilities for the 737 MAX and 787. Calhoun said, “In our shadow factories, we put more hours into those airplanes than we do to produce [them] in the first place.”

These growing rework costs appear to be classified as deferred production costs to keep them from affecting Boeing’s announced profits. We explain below.

Summary

• Program accounting hides ballooning program costs.
• War and geopolitical tensions increase regional risks.
• Certification delays to the 737-7 and -10 significantly increase Boeing’s MAX order risk.
• The 787 order book is relatively healthy despite geopolitical and customer risks.
• 777 & 777X orders are weighed down by geopolitical issues and a soft cargo market.