Boeing’s bad quarter: Company delays 777X, 737 MAX timeline as COVID hits business

Jul 30, 2020

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Travellers looking forward to flying on Boeing’s next wide-body jet will have to wait a little longer. The coronavirus pandemic that’s wreaked havoc on the airline industry has also hit Boeing, affecting aircraft timelines across the planemaker’s commercial jets division.

Chicago-based Boeing slid the introduction of the 777-9X, an updated and re-engined version of its venerable 777 wide-body, into 2022. The company cited the pandemic among a myriad of causes for the delay during its second-quarter earnings call Wednesday. The shift from 2021 was expected following comments by Emirates to Bloomberg earlier in July.

The 777X is not the only Boeing program delayed by COVID. The 737 MAX re-certification is also taking longer than it otherwise would have due to the virus. The expected return-to-service date is now in the fourth quarter pending regulator approval, the planemaker’s CEO Dave Calhoun said Wednesday.

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The 777X slowing down after landing. (Photo by Zach Wichter/The Points Guy.)
The 777X landing after its first flight in January 2020. (Photo by Zach Wichter/The Points Guy.)

 

“The current challenges we have are of unprecedented proportion”, Calhoun said, referring to the pandemic and the on-going grounding of its breadwinning 737 MAX family. The planemaker lost $2.4 billion during the second quarter, a period when it only delivered 20 planes from its commercial division and wracked up more cancellations than new orders.

Looking forward, Boeing said it is using the crisis to re-evaluate its production “footprint”, including the possibility of consolidating 787 production in ether Everett, Washington, or North Charleston, South Carolina. This would allow it to reduce costs in a way that executives say it could not before the pandemic.

“I don’t want to predispose any answers… we’re taking a very serious effort”, Calhoun said about speculation Boeing could move all Dreamliner production to South Carolina.

Things may not get better for Boeing in the short term. Calhoun acknowledged that the resurgence of COVID infections in the U.S. since the end of June, as well as elsewhere around the globe, has delayed the recovery in air travel and thus the need by many airlines for new jets.

Boeing is in talks with all of its customers about the status of their commitments, said Calhoun. This includes delays and re-timing of deliveries to outright cancellations. Aircraft leasing company AerCap, for example, said Wednesday that it had cancelled orders for 15 MAXes.

Against that backdrop, Boeing is cutting production rates. The 737 MAX will only resume to 31 aircraft a month by 2022; the 777 and 777X will drop to two planes a month from five next year; and the 787 will drop to six jets a month from 10 in 2021, pending a return in demand for wide-body long-haul aircraft.

Related: FAA move could have Boeing 737 MAX flying again this fall

Boeing can count five of the largest U.S. airlines among its customers: Alaska Airlines, American Airlines, Hawaiian Airlines, Southwest Airlines and United Airlines. All have outstanding orders for either 737 MAX or 787 jets and are working to restructure future deliveries as they manage through the crisis.

On Tuesday, Hawaiian CEO Peter Ingram said the airline has had “productive” talks with the planemaker regarding the status of its order for five 787-9 jets. The first aircraft are unlikely to arrive before 2022 or 2023, instead of next year, though nothing has been finalized, he said.

Gary Kelly, CEO of Dallas-based Southwest and also the largest global operator of 737s, stood by the MAX during the airline’s own earnings call earlier in July. He called the carrier’s all-737 fleet “more appropriate than ever for the current environment”, and said the airline looks forward to returning the MAX to service before the end of the year.

But standing by the jet does not mean Southwest wants lots of them right away. The airline has already delayed 75 of the 123 MAXes it was scheduled to take through 2021, and executives now say that they may slow the remaining 48 deliveries even more.

Boeing plans to deliver all of the roughly 450 737 MAXes that it has in storage within a year of re-certification — or by the end of 2021 — said Calhoun.

Related: Global air travel unlikely to recover until 2024 as COVID remains ‘issue’

Featured image by Zach Wichter/The Points Guy.

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