Boeing will likely miss a key 737 MAX jet production target in 2024, analysts at rating agencies Moody’s and S&P have observed recently, noticing the steep challenges faced by the aviation giant as it ramps up its strongest-selling passenger jet family.
Boeing’s goal is to produce 38 MAX jets a month by the end of 2024, up from 25 jets a month in July. However, Moody’s and S&P stated that the goal may not be reached until 2025 due to risks like possible labour disruptions at the planemaker’s facilities in the Seattle area. Boeing, however, faces no immediate risk of a credit downgrade that would drop its rating to junk levels, the two rating agencies clarified.
Jonathan Root, lead Boeing analyst at Moody’s, told Reuters that the American planemaker would end 2024 producing 32 MAX jets per month, and reach the target of 38 in the second half of 2025.
“We remain in a ‘show me’ state of mind,” he said.
Production and deliveries of 737 MAX jets, which are closely watched by investors and airlines, have slowed since the January 5 mid-air panel blowout on an Alaska Airlines flight that exposed longstanding quality-control problems at the jet maker.
Boeing slowed output to improve upon production quality, but the decline in deliveries has taken a toll on the venture’s cash flow. The business burned about USD 8.3 billion in cash in the first half of 2024 and expects free cash flow to be negative this year, burdening its balance sheet.
“We see risks to reaching that number (38), including labour negotiations and the company’s history of underdelivering relative to targets. We view increasing and stabilising MAX production as necessary to generating free cash flow, which is ultimately what we care about to maintain the rating,” said Ben Tsocanos, aerospace director at S&P Global Ratings.
Both S&P and Moody’s rate Boeing one notch above junk status. New CEO Kelly Ortberg has yet to publically discuss any production plans for the company.
Spirit AeroSystems, which is set to be acquired by Boeing, has the leading role in supporting increased output, analysts said. The company produces the 737 fuselage that is used to make the finished planes at Boeing’s facilities in Washington state.
Spirit shipped 27 fuselages to Boeing in the June quarter, despite producing 31 a month. Since March, Boeing has been first inspecting the new fuselages at Spirit’s factory in Wichita, Kansas, and the vetting process has taken longer than expected, as per the Reuters report.
Low-cost American carrier Allegiant, a Boeing customer, recently said it expects a “slower delivery cadence” from the planemaker in 2025 and 2026.
When Allegiant placed an order for 50 737 MAX planes in 2022, it was expected to take delivery of 10 of the jets in 2023, 24 in 2024 and 16 in 2025. However, the venture is still waiting for its first MAX aircraft.
Boeing delivered 43 commercial jets in July, unchanged from the same month a year earlier when it faced supply chain hurdles, as the US planemaker works to grow aircraft production under Ortberg’s watch. The company handed over 31 MAX jets to customers last month, including a handful to Chinese carriers. Boeing resumed deliveries of its best-selling aeroplane in July to the Asian country, in a boost for the company, after a delay stemming from regulatory issues.
Boeing has also finalised a guilty plea to a criminal fraud conspiracy charge and agreed to pay at least USD 243.6 million after breaching a 2021 agreement with the United States Justice Department.
Boeing also reported 72 gross orders in July, up from 52 during the same month a year earlier, including orders for 57 737 MAX planes that were partly announced during the Farnborough Air Show. After adjustments to reflect the backlog, Boeing reported adjusted net orders for the month of 72. That brought Boeing’s gross order total so far this year through July 31 to 228. After removing cancellations and conversions, Boeing posted a net total of 186 orders since the start of 2024.
El Al Israel Airlines has now signed a deal with Boeing for the purchase of up to 31 737 MAX aircraft worth as much as USD 2.5 billion. El Al, Israel’s flag carrier with an all-Boeing fleet, said the agreement includes the purchase of 20 737 MAX airliners for USD 1.5 billion and options for 11 more.
Delivery is expected to begin in 2028, although the carrier said it would consider bringing forward the operation of several 737 MAX aircraft as early as 2027 through a dry lease. The new planes will replace the airline’s current short-haul fleet of ageing Boeing 737-800 and 737-900 aircraft.