Boeing has slashed its ambitious plans to deliver around 450 737 MAX aircraft within a year after grounding. The airline now only expects to deliver about half of that, or around 225 aircraft by the end of 2021, with the remaining deliveries in 2022.
Slashing Boeing 737 MAX deliveries
Boeing has about 450 737 MAX planes already built and in storage. In its second-quarter results, the aircraft manufacturer anticipated delivering all 450 of these aircraft in the first year after the ungrounding of the 737 MAX. While Boeing still anticipates an ungrounding order to come in the fourth quarter, it has slashed its 737 MAX delivery outlook in half for the next year.
Greg Smith, Executive Vice President of Enterprise Operations and Chief Financial Officer at Boeing, stated the following on the earning’s call:
“We currently have approximately 450 737 MAX aircraft built and stored in inventory. We expect to have to remarket some of these aircraft and potentially reconfigure them, which will extend the delivery timeframe. We now expect delivery of about half of the aircraft currently in storage by the end of next year, and the majority of the remaining in the following year. Delivery from storage will continue to be our priority after assisting our customers with their return to service. We expect the 737 MAX delivery timing, along with the production rate ramp up profile, to continue to be dynamic, as they will ultimately be dictated by the pace of the commercial market recovery, which has been slow and remains uncertain.”
Why Boeing is slashing its delivery outlook
Mr. Smith took a two-fold approach here. First, Boeing will need to work out what to do with some 737 MAX aircraft. Some customers, such as Jet Airways, no longer fly passengers and do not require the MAX jets built and parked. For these planes, Boeing has been looking for homes for those jets, without necessarily a lot of public success. However, some carriers may have expressed interest privately while they await an ungrounding. If Boeing does find new homes for some planes, that means those aircraft have to undergo an interior reconfiguration and exterior painting– both of which add time to the delivery process.
The second thing on Boeing’s mind is the ongoing crisis. The crisis has absolutely devastated the airline industry, though there are hopes that a slow and steady rebound is occurring that would give the industry some incentive to take new jets heading into 2021 and beyond. Mr. Calhoun, CEO of Boeing, considers that there could be an uptick in 737 MAX sales, especially “white tail” planes, if a vaccine comes around and schedules continue to increase, and carriers see that they need more narrowbody aircraft.
A third condition, which Boeing briefly touched on, is China. Many 737 MAX aircraft currently built are expected to head over to Chinese airlines, but with China unsure about when it will recertify the 737 MAX, those deliveries could be delayed.
Targeting a fourth-quarter return to service
Underlining all of this is Boeing’s target for a fourth-quarter return to service for the 737 MAX. Boeing is hopeful that regulators will be ready to sign off on the MAX, and the company can work with its customers to get the aircraft back into service. The European Union and the Federal Aviation Administration are two regulators that have hinted that the MAX ungrounding is coming soon, with the former being a little more indicative of an impending ungrounding of the 737 MAX.
Boeing has spent a lot of time working on a return to service for the plane. CEO Calhoun stated that the company had been rehearsing with regulators about the process of certifying each aircraft before delivery, and so delays in certifying each plane were not considered in slashing the delivery outlook for the MAX.
Most of the initial deliveries are expected for customers where Boeing already has a contract in place, for example, Southwest Airlines, American Airlines, Ryanair, and others. Aircraft that need modifications will come later.
Boeing has resumed production on the 737 MAX and expects to produce the aircraft at very low rates through the end of the year and expects to increase it to 31 aircraft by the beginning of 2022.
That production rate plan could be adjusted based on the 2021 delivery profile. In addition, the ultimate dictator will also be whether customers want to take new 737 MAX jets.
Do you think Boeing’s 200+ 737 MAX deliveries in a year is a reasonable timeline? Let us know in the comments!