Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- China bans Boeing, US parts imports in tariff war April 15, 2025
- Boeing welcomes COMAC competition as Asia-Pacific demand soars April 15, 2025
- How good is the C929? April 14, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 17. April 11, 2025
- Uncertainty plagues airline, aerospace, lessor industries over tariffs April 10, 2025
Hopes, skepticism, for Boeing from suppliers
Subscription Required
By Scott Hamilton
Feb. 6, 2025, © Leeham News: Hope and skepticism for Boeing permeated the sidelines of a suppliers’ conference this week in the Seattle area as the big manufacturer struggles to regain footing following six years of back-to-back-to-back crises.
Boeing’s CEO Kelly Ortberg said on Jan. 28 that the company is on a path with the Federal Aviation Administration to achieve a production rate of 38/mo for the 737 MAX later this year. Afterward, rates would increase in increments of 5/mo every six months. At this rate, production won’t return to the pre-MAX grounding production of 52/mo until the fall of 2027.
But suppliers at the annual Pacific Northwest Aerospace Alliance (PNAA) conference this week interviewed on the sidelines think Boeing won’t hit rate 38 until late next year. If Boeing then could ramp up in increments of 5/mo thereafter, the pre-grounding production rate would be achieved in the fall of 2028, nine years after the MAX was grounded.
Suppliers think the ramp up rate is also optimistic.
Ihssane Mounir. Boeing photo.
But at the PNAA conference, Ihssane Mounir detailed Boeing’s new approach to the supply chain, safety and quality Boeing has adopted since the grounding and after the Jan. 5, 2024, accident involving a door plug separation from an Alaska Airlines 737-9 MAX. Mounir is the Boeing Commercial Airplanes (BCA) senior vice president of Global Supply Chain & Fabrication.
The same suppliers who are skeptical of the ramp plans express hope and optimism of BCA’s plans to return to normalcy.
A few also expressed residual anger toward Boeing over the six years of lurching from one crisis to another that disrupted business.
One supplier noted that it received no tooling orders for years because of the disrupted production and the absence of a new airplane program.
Boeing Deferred Production Costs: $39bn since 2019 MAX grounding, $22bn for 737
By Karl Sinclair
Feb. 04, 2025, © Leeham News: The Boeing Company (BA) released its 2024 FY Annual Report this week and as expected, it was awash with red ink.
On the Jan. 28, 2025, earnings call, CFO Brian West had this to say, in reference to a question regarding the inventory build-up:
“In terms of the inventory, we’ve got $87.5bn worth of inventory in the company right now…. So that is the big cash flow benefit that we’re going to see over the next couple of years-ish and it’s all because we’ve been sitting on this big investment that we look forward to having unwind with deliveries, and that’s what we’re focused the team on out in Seattle.”
Indeed, the balance sheet does indicate a figure of $87.55bn sitting in the Inventory account, but what is the detailed break-down of what is contained therein?
The recent five-month certification stoppage on the 777X program, due to the thrust-link breaks, forced Boeing to take a charge on the program in 2024 of $3.499bn This is in addition to the $6.493bn reach-forward loss taken on the 777X in 2020.
Along the way, Boeing has also recorded “abnormal production costs”. In 2023 and 2022 the program wrote off $513m and $325m, respectively.
For those keeping track, this is $10.83bn in losses for the variant, without having delivered a single aircraft to an airline or lessor.
Related Story
It is a recurring problem for Boeing and one that traces all the way back to when it started using program accounting to report earnings.
Boeing FY 2024: Capital raise, debt, order cash advances helped Boeing avoid running out of cash in 4Q
Subscription Required
By Karl Sinclair
Note: Boeing has not released its Securities and Exchange Commission filing (10-K) for the full year. Much of the analysis contained herein is based on press releases and previously filed statements, exact figures being unavailable and noted as such. A section of the analysis will also be based upon comments by CEO Kelly Ortberg and CFO Brian West, taken from the Jan. 28 earnings call. LNA reached out to Boeing and was told that the annual report was to be filed later today.
Feb. 3, 2025, © Leeham News: Financial documents reveal that The Boeing Company (BA) needed to make some very astute financial moves during 2024 to avoid running out of operating capital in the fourth quarter.
It did so by tapping into three sources: lenders, investors, airlines, and lessors (purchasers).
At the end of 2023, Boeing indicated on its Consolidated Statement of Cash Flows an ending balance of $12.691bn in cash and equivalents as of December 31, 2023.
Free cash flow (FCF) for 2024 was ($14.31bn), with ($4.098bn) used in 4Q2024 alone.
If Boeing does not make these moves, then cash burn ($14.31bn) will outstrip cash and equivalents of $12.691bn in the fourth quarter, and Boeing must dip into its revolving line of credit.
Boeing needed capital, and it needed it fast.
Boeing sees achieving pre-MAX grounding production rates 8 years later
Subscription Required
By Scott Hamilton
Jan. 30, 2025, © Leeham News: When Airbus began to record more orders than Boeing in the early 2000 decade, Boeing’s CEO dismissed the shift.
Orders didn’t matter, sniffed Phil Condit. Only deliveries mattered. The statement ignored the obvious: if you didn’t have orders, you wouldn’t have deliveries.
For much of the past two decades, Airbus has been delivering more airplanes than Boeing. According to both companies’ forecasts, this trend will continue in the heart of the market in the coming years by a wide margin.
Deliveries of the 737 MAX are key to Boeing’s financial recovery. The cash flow and profits from the MAX line will drive Boeing’s ability to develop a new airplane. (This does not ignore the necessity of Boeing’s defense unit to get its financial house in order.)
Kelly Ortberg, Boeing’s CEO, appeared on the financial news network CNBC this week and said Boeing hopes to return to a production rate of 38/mo in the second half of this year.
“I’m not going put a date on when we need to get to rate 38 and get approval for the FAA to go beyond,” he said. “It’s more important that we do this right; we have a stable production system, we get through that, and I expect by the second half of the year, we’ll have that approval, and we’ll be moving to a higher production rate.”
Rate breaks in 5 every six months
Ortberg added, “Well, we’re planning to be at about 38 a month for the balance of this year, ramping up, and we’ll go in five-step increments every six months after that. On 787, we’re at five a month rate, moving to seven a month rate…hopefully, that’s in the next quarter or so.”
The 737 data can be extrapolated to suggest Boeing will return to the pre-MAX grounding rate (52/mo) in the first half of 2027. (Others are skeptical, and the ramp-up appears aggressive.) This would be eight years after the MAX was grounded on March 10-13, 2019, for what turned out to be 21 months.
Boeing was on its way to a rate of 57/mo by the end of 2019. Under the Boeing plan, this rate won’t be achieved until the end of 2027. If Boeing still believes demand supports this rate, a higher rate of 63/mo that was planned pre-grounding would follow in 2028.
Airbus will also increase its production rate. Production and delivery forecasts appear to place Boeing at a permanent distant second to Airbus as long as the competitors are the A320neo and 737 MAX.
Ortberg sees path with FAA for returning to full rate 737 production
By Karl Sinclair
Jan. 28, 2025, © Leeham News: Boeing’s CEO Kelly Ortberg, now five months into his job, painted an encouraging picture of the company’s path to recovery in an appearance on the financial news network CNBC before the 2024 full-year earnings call.
Kelly Ortberg, CEO of Boeing. Credit: Boeing.
Ortberg said there is a path for Boeing Commercial Airplanes to win approval from the Federal Aviation Administration (FAA) to return this year to a production rate of 38/mo for the 737 MAX. This is the rate before the Jan. 5, 2024, accident involving an Alaska Airlines 10-week-old MAX 9 in which a door plug blew off the airplane at 14,000 ft after take off from Portland (OR). The accident was traced to a production failure by Boeing. Nobody died, and the injuries were minor. The plane safely returned to Portland for an emergency landing.
Since then, production has trickled along at 20 or less per month. Returning to a rate of 38 and growing beyond is critical to Boeing’s financial recovery.
Ortberg told CNBC this path appears to be on track finally.
Boeing: 2024 Earnings-another bad, bad year
By Karl Sinclair
Jan. 28, 2025, © Leeham News: The Boeing Company (BA) reported its full-year 2024 fiscal results today and it went pretty much as expected: it was another bad, bad year.
The full press release is here.
Boeing had a tumultuous 12 months:
- A door-plug departed a brand new Alaska Airlines 737-9 MAX aircraft shortly after takeoff in January;
- Its commercial crew spacecraft stranded astronauts at the ISS in June;
- The company was forced to an agreement to purchase a major supplier (Spirit Aerosystems) in July;
- A CEO change happened in August;
- The 777X flight testing program ground to a halt due to broken thrust links (also in August);
- A 53-day union strike hit the PNW in September;
- An equity sale to raise cash occurred in October; and finally,
- The 2024 financial year-end was put out of its misery with this filing.
777 P2F market grinds to a halt: lack of feedstock, Boeing, war, money to blame
Subscription Required
By Scott Hamilton
Jan. 27, 2025, (c) Leeham News: Boeing’s inability to deliver 787s on time and continued delays in certification of the 777-9 mean airlines planning to replace aging aircraft or expand must retain older aircraft longer than expected.
Airbus’ inability to deliver the A350 on planned schedules also affects fleet renewal and expansion plans, but to a much lesser extent than caused by Boeing.
IAI’s Big Twin Boeing 777-300ERF. Credit: IAI.
Boeing’s circumstances also mean that feedstock intended for conversions of 777-300ERs from passenger aircraft to freighters upset the business models of the three P2F conversion companies: IAI Bedek, KMC, and Mammoth Freighters.
Finally, certification of IAI’s conversation program is running two years behind schedule, and Boeing’s reluctance to license critical flight control software has also stalled P2F programs.
In addition to the problems outlined above, the inability to convert the big twin 777-300ER to freighters or receive new 777-8Fs and A350Fs in the coming years means that 747-400 freighters, which are gas-guzzlers by today’s standards and expensive to maintain, must remain in service longer than planned.
It’s a bleak picture emerging for the near- to-mid-term freighter market.
Boeing came close to running out of cash in 4th quarter
By Scott Hamilton
Jan. 23, 2025, © Leeham News: The Boeing Co. nearly ran out of cash in the fourth quarter, the company said today as it previewed earnings that will be announced next week.
Boeing’s fourth-quarter cash flow was negative at $3.5bn, in part due to a strike that overlapped the third and fourth quarters.
Fourth quarter revenue will only be $15.2bn, reflecting the 53-day strike by its largest union, the IAM 751 in Washington and Oregon. The strike began on September 13. A new contract was approved on October 31. Employees returned to work by November 12, but retraining and the Christmas-New Year holidays delayed returning to full production.
Boeing said it lost $5.46 per share, or nearly $3.4bn, in the quarter. The company raised $25bn in cash and securities in the quarter. It entered the fourth quarter with $10bn in cash and short-term investments. It had $26.3bn at year-end. These figures illustrate how precarious Boeing’s position had become during the fourth quarter.
Earnings: Pay closer attention to the supply chain than to the OEMs
Subscription Required
By Scott Hamilton
Jan. 23, 2025, © Leeham News: Earnings season begins today. Among the companies followed by LNA, GE Aerospace and Hexcel report today. RTX and Boeing report next week. ATI and Spirit AeroSystems follow the week after. Other suppliers follow then.
Airbus doesn’t report until Feb. 20. Rolls-Royce reports on Feb. 27.
The manufacturers draw the headlines, but LNA found long ago that the supply chain often provides better information to draw conclusions about the future than listening to the OEMs. All it takes is one supplier to fall down on the job to muck up the works for the OEMs.
That’s not to say listening to the OEMs is not important. Clearly, it is. But there’s just no getting around it: the credibility of many of the OEMs is damaged. Airbus hasn’t hit its production ramp up targets in years. Quality control suffers. And deliveries are consistently late.
Steven Udvar-Hazy, executive chairman of the board for Air Lease Corp, says that every single Airbus aircraft, 250 of them, has been late since 2017. That’s long before the pandemic began in March 2020, which caused such disruption continuing to this day. Airbus was still delivering A320ceos during 2017 and 2018, which didn’t have engine issues.
Boeing’s credibility speaks for itself. It doesn’t matter that it has a new CEO. Until Boeing starts performing, anything it currently says is hope, not performance. Post-strike delivery recovery will be an important indicator of Boeing’s performance in the essentially truncated fourth quarter and January.
Suppliers often discuss information on their earnings calls that provides a better understanding of production rates at the OEMs and where downstream issues are or are emerging.
What’s the future of the Boeing 787-8?
By the Leeham News Team
Subscription Required
Jan. 16, 2025, © Leeham News: The short-body Boeing 787-8s have a problem when they come off lease. They aren’t as efficient people haulers as their larger cousins, the -9 and the -10.
Concept of Boeing 787-8F. Credit: Leeham News.
Understanding that, what is their future? 1) Re-lease them to another operator or extend the current leases, both at very favorable rates, to get something out of them. 2) Reduce them to spares, which could work for a few to fill the spare parts pipeline, but after that the spares value really starts dropping as supply goes up. 3) P2F freighter conversions.
Of the choices, a P2F program seems the best way to extract value out of the airframes. The key to making it work is conversion cost. There have been some fairly solid rumblings that Boeing has either completed the conversion engineering package or, in fact, started to offload the planning to Boeing of India to get the package executed. Boeing says there is no current engineering underway but would not comment on previous work.
Related Article
Let’s look at what it takes from the P to the F.