- Boeing shares fell nearly 4% after its earnings report
- 2020 net loss hit a record of $11.9 billion
- 737 Max grounding and the coronavirus pandemic both contributory factors
- Total company backlog at quarter-end was $363 billion
- Operating cash flow of ($4.0) billion
Covid-19 has decimated air travel globally and the aircraft manufacturers are now really feeling it, and non-other than Boeing who reported its annual results Tuesday 26 January 2021.
Boeing shares fell after its earnings report showed its 2020 net loss hit a record of $11.9 billion amid the 737 Max grounding, delays to its 777X program and the global coronavirus pandemic.
The company lost $15.25 a share in the fourth quarter on an adjusted basis that took Wall Street by surprise; analysts had forecast a loss of $1.80 share.
Revenue of $15.3B (-14.6% Y/Y) misses by $60M.
Already beset by engineering delays the Boeing 777X program delivery time frame has been pushed back, compounded by weak air travel globally demand and increased certification requirements in the wake of the 737 Max crisis.
Boeing now expects to deliver the first 777X at the back end of 2023, more than two years later than its forecast last April.
Speaking specifically about the 777X Boeing, President Dave Calhoun said:
“We are determined to meet every compliance requirement from every regulator in the world on day one, which meant that we had to incorporate a few design changes, so it is going to be a little more costly, it is going to take a little longer ultimately to certify.”
Boeing are working closely with global regulators on all aspects of the 777X development. This involves listening to all their feedback and applying lessons learned from their experiences on the 737 MAX program recertification and applying it to the 777X certification plan. It also involves making prudent design modifications as necessary to meet the various global regulators expectations.
As part of that assessment, Boeing has made the decision to implement certain modifications to the aircraft design. The decision to make these modifications, which will involve firmware and hardware changes to the actuator control electronics, reflects Boeing’s current judgment of global regulators compliance expectations. This that decision has led to these revised schedule assumptions.
As far as year-end figures we can see the 777X program recorded a $6.5 billion pre-tax charge in Q4.
With regards to the 787 Dreamliner, the pandemic’s impact on longer, international flights is compounding problems with the 787 Dreamliner program. The company had previously cut output of those jets following production issues that have hampered deliveries which are key to Boeing because it’s when customers pay the bulk of the aircraft’s price.
Boeing has stated that it doesn’t expect to deliver any Dreamliner’s this month [January] and very few “if any” in February.
It is expected for 787 deliveries to ramp in the latter end of this quarter. However, the warning from Boeing is production will be back-end loaded with no deliveries made this month [January] and most likely very few, if at all any in February. Boeing expect to deliver the vast majority of the 787 aircraft inventory by the end of the year – we will keep you updated on progress.
In summarizing the financial year end operational position of the wide body business, Boeing see a total wide-body market of more than 8000 projected deliveries over the next two decades, with replacement demand for over 1,500 large wide-body aircraft, which are well aligned to the 777X. Production rate expectations for the combined 777, 777X program remains at two per month in 2021. Boeing continue to assess production plans to efficiently transition from the 777 to the 777X.
During 2020 the 737 MAX received airworthiness recertification, and significant progress was made in the last quarter  in progressing the Boeing 737 program.
The 737 MAX has undergone circa 400,000 engineering hours, 1,400 test and check flights, and over 3,000 flight hours completed to deliver one of the most rigorous certification efforts in recent aviation history, as work continues with the global regulators and Boeing customers to safely return the airplane to service worldwide.
The FAA in the United States, ANAC in Brazil, Transport Canada, and very recently [end of Jan] EASA in Europe have approved the resumption of 737 MAX operations, marking important milestones on Boeing’s return to service for the 737 MAX.
Boeing’s are actively focusing on safely delivering the 737 MAX aircraft that are in inventory, which began in December of last year . Prior to the delivery, teams are performing all the necessary tests and ensuring each aircraft receives customized care and rolls into a delivery stall ready for customer acceptance and FAA review.
So far since the FAA’s approval to return the MAX to operations on November 18 2020, Boeing has delivered more than 40 737 MAX aircraft to their customers – here at aircraft-completion.com we do not currently have the breakdown at this stage if any of those deliveries are inclusive of green VIP completions aircraft – we do know that 5 airlines have returned their fleets to service, safely flying over 2,700 flights and approximately 5,500 flight hours as of January 25, 2021.
The current run rate for the 737 program is on the low side, and expectations at Boeing are to gradually increase the rate to 31 per month in only 2022. Any difference in those rates will be as a response to market demand. Throughout 2021 the 737 production ramp plan will continue to inform the delivery profile as Boeing continue to communicate transparently with their supply chain to ensure stability: particularly in light to the impact of Covid-19 on global supply chains and manufacturing production outputs.
At the end of the quarter, Boeing had approximately 3,300 aircraft in the 737 backlog, and 410 MAX aircraft in inventory.
With a regard to the financials, Boeing booked a $468 million write-down against “abnormal production costs” on the 737 Max program.
Financial year end:
Boeing revenue was 4.7 billion, driven by a lower wide-body delivery volume, partially offset by higher 737 deliveries and a lower 737 MAX customer consideration charge in the quarter compared to the same period last year.
Operating margins declined driven by the charge on the 777X program, lower delivery volume and a $468 million of abnormal production costs related to the 737 program. Again, partially offset by lower 737 MAX customer consideration charge.
Boeing’s fourth-quarter revenue dropped 15% from a year earlier to $15.3 billion, better than analysts’ forecasts for $15.07 billion in sales. The company’s net loss for the three months widened to $8.4 billion from $1.01 billion in the fourth quarter of 2019. The company doesn’t expect to return to cash flow positive until 2022.
Sustainable aviation fuels:
As a final take away, also included in the year end David Calhoun highlighted the commitment that Boeing commercial airplanes will be capable and certified to fly on 100% sustainable aviation fuels by 2030 signalling a clear intent from the company to adjust, adapt and be ready for the centuries head.
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