Leeham News and Analysis
There's more to real news than a news release.
UPDATED: Boeing says it still will deliver up to 450 737s this year
Boeing Co. photo
By Bryan Corliss
April 26, 2023, © Leeham News — Boeing says it will increase rates on the 737 line in Renton to 38 a month to maintain its plan to deliver between 400 and 450 737 MAX jets to airlines this year.
That was the first line of the company’s first-quarter earnings release, which showed Boeing lost $149 million on the quarter, on revenues of $17.9 billion.
Boeing had optimistically aimed for jumping MAX rates from the current 31 a month, as soon as June. However plans for the 737 line had been in question, after recent revelations that manufacturing problems and a software issue would cause delays in deliveries.
- ‘Gnarly’ 737 defect to take weeks to fix
- Boeing commits to MAX increases
- Improving numbers at BCA
- Supply chain issues continue, Boeing says
Pontifications: A contrarian view of Stock Buybacks
By the Leeham News Team
April 25, 2023, © Leeham News: Airbus and Boeing last week held their annual shareholders’ meetings. Boeing continues to suspend dividends and stock buybacks as it struggles to recover from the grounding of the 737 MAX and delivery suspensions of the 767/KC-46A, 787, and 737 (again); and the years-delayed certification of the 777X. Losses and charges at its defense unit mount as well, hurting profits and cash flow.
Before the MAX grounding in March 2019, Boeing spent more than $60bn in stock buybacks since the 1997 merger with McDonnell Douglas. “Shareholder value” became a priority—and dirty words to those who long for the days of a Boeing based on engineering excellence vs focus on Wall Street and the stock price.
Airbus has taken over the lead in airplane engineering and innovation. Boeing in November deemphasized new product development and pointed to its guidance of $10bn in free cash flow by 2025. However, Airbus now puts shareholder value as an important business goal. At its annual meeting, Airbus continues its dividend and stock buyback programs. But Airbus buybacks and dividends are a fraction of what Boeing has spent and Airbus committed to a €10bn war chest for future contingencies.
Stock buybacks remain a target of criticism. While our view of over-emphasis on shareholder value is well known—we favor a balance on free cash flow expenditures between shareholder value and new product development—there is another side to stock buybacks that haven’t been discussed.
Leeham News is going to take a step back and dig into the details of the buybacks, analyzing the numbers behind the repurchase program, its results, and possibilities for the future.
Fixing the fix: the Aircraft Certification, Safety Act
Last in a series of four articles
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By the Leeham News Team
Commentary
April 24, 2023, © Leeham News: Congress missed the boat authoring the Aircraft 
Certification, Safety and Accountability Act (the Act) because it felt that more regulations equals more safety. But the current Harvard Business Review notes that “Activity is not a measurable metric of success.” We think that additional layers of regulatory requirements are not necessarily additional layers of security.
Understanding that Congress was a bit wide of the mark, here are some of the changes we would implement if we were asked for our recommendations.
Pontifications: Skyline backlog suggests higher production rate than Boeing targets for 777X
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By Scott Hamilton
By Scott Hamilton
April 17, 2023, © Leeham News: Boeing’s skyline for the 777X, reported by Cirium, suggests there will be a need to boost production higher than the company’s target of 4/mo by 2025/2026. The delivery stream data is good news for Boeing, which doesn’t detail this information. Boeing took a billion-plus dollar write-off on the program, which has been marred by delays, engine issues, and certification questions.
Boosting the production rate beyond 4/mo will be an important contributor to Boeing’s financial recovery in the second half of this decade. At its peak, Boeing produced 8.3 777s a month, or 100 a year.
The current production rate of the program is two per month, for the 777-200LRF. Boeing’s website says the combined rate for the 777 Classic and the 777X is three per month. But a year ago, Boeing said it was suspending production of the X through 2023. Corporate communications would not comment on the contradiction, citing the quiet period before the 1Q earnings call on April 26.
Air India’s order for 10 Boeing 777Xs in February (among more than 200 other Boeing aircraft) is welcome news for the slow-selling airliner.
The airline’s orders haven’t been listed yet in Boeing’s running tally of orders, meaning the firm contract hasn’t been signed.
Summary
- Data shows deliveries of 777-200LRF drops dramatically in 2025.
- Production rate goal of 4/mo by 2025/26.
- Backlog shows demand for higher production rate.
Boeing offers bonuses up to $10,000 as it searches for scarce talent
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By Bryan Corliss
April 17, 2023, © Leeham News: The Boeing Co., which has talked of making significant production rate increases “very soon,” is offering bonuses of up to $10,000 as it recruits workers in touch-labor positions in both South Carolina and Puget Sound.
In Charleston, Boeing is offering $5,000 signing bonuses specifically for experienced painters and interiors installers as it tries to first stabilize, then increase, production of 787s. Boeing wants to reach a rate of 5/mo by the end of this year and 10/mo by 2025/26.
In Puget Sound, the company isn’t offering signing bonuses, but it is offering hefty payouts of up to $10,000 to current employees who refer experienced aerospace workers to openings in a number of job categories, including structures mechanics and general machinists.
The moves come as analysts continue to sound alarms about workforce shortages across the industry.
“We continue to remain cautious on the supply chain’s ability to support the planned production rate increases in 2H23 and into 2024,” wrote Ken Herbert, with RBC Capital Markets, in a report earlier this week. “We continue to see labor availability and training as the largest headwind facing the sector.”
- Boeing hiring as it prepares to ramp up
- Boeing offers hiring incentives
- Northwest aerospace labor market is tight
- S. Carolina: Lockheed-Martin offers $10K
Bjorn’s Corner: New aircraft technologies. Part 8P. Propulsion advances
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By Bjorn Fehrm
April 14, 2023, ©. Leeham News: This is a complementary article to Part 8. Propulsion advances. It discusses in detail the next-generation propulsion and what efficiency improvements to expect from different technological advancements.
Pontifications: Airbus grows in China while Boeing remains on the sidelines
By Scott Hamilton
April 11, 2023, © Leeham News: Airbus last week firmed up an order for 150 A320neos and 10 A350-900s with China. The deal was announced last year.
Additionally, Airbus and the Chinese government agreed to add to the A320 family assembly site in Tianjin, increasing the capacity of the plant. This will be another step in Airbus’ goal to achieve a production rate of 75 per month by 2026 for the A320 family.
And that’s not all. Airbus and the China National Aviation Fuel Group (CNAF) signed a Memorandum of Understanding to increase the development of Sustainable Aviation Fuel.
Meanwhile, Boeing remains essentially frozen out of China. Deliveries of the 737 MAX remain stalled. Although China Southern Airlines outlined expected deliveries this year and through the next few years, we’ve seen this sort of thing before. Until an official announcement comes from Beijing authorizing deliveries, or some of the stored airplanes are delivered, words are just words.
That said, there are some solid indications we’re seeing that Boeing deliveries to China may well resume in the not-too-distant future, but on a glacial pace. The financial viability of some airlines within China, while opaque to outsiders, is monitored by the CAAC, China’s regulator. Some airlines are deemed too financially risky now to accept delivery of any new aircraft, whether the OEM is Boeing or Airbus.
While Boeing’s 140 MAXes originally ordered by China remained in a Twilight Zone of sorts, delivery of some Airbus A320neos also has been blocked. Generally, though, Airbus continues to tender airplanes and win orders while Boeing sits on the sidelines.
MCAS, The Aircraft Certification Act and the unintended consequences of Congressional Intervention
Third in a Series
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By the Leeham News team
Boeing whistle blower Ed Pierson testified about issues surrounding the 737 MAX following the two crashes that killed 346 people. New York Times photo.
April 10, 2023, © Leeham News: Action by the US Congress following the Boeing 737 MAX crisis resulted in a host of new laws intended to fix shortcomings in regulations that contributed to the crisis. Sections in the legislation involved safety reporting and Whistle Blower protections. The Act provides for the establishment of Safety Management Systems.
But as we’ve seen in our series, there have been shortcomings in the legislation. These sections are no different.
Bjorn’s Corner: New aircraft technologies. Part 7. Propulsion
By Bjorn Fehrm
April 7, 2023, ©. Leeham News: This is a summary of the article New aircraft technologies. Part 7P. Propulsion. The article discusses how developments in the next-generation airliner propulsion system will be the second most important area for improved efficiency and lower emissions after we have decided on the fuselage type.
Figure 1. The CFM LEAP engine gained 15% efficiency compared to the engine it replaced, the CFM56. Source: CFM.
Bjorn’s Corner: New aircraft technologies. Part 7P. Propulsion
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By Bjorn Fehrm
April 7, 2023, ©. Leeham News: This is a complementary article to Part 7. Propulsion. It discusses in detail the next-generation propulsion systems and what to expect from their possible increase in performance and efficiency.