Boeing has posted a third straight year of losses as it battles continued problems on its key 787 ‘Dreamliner’ and KC-46 military tanker programmes but has a silver lining in the resumption of production and deliveries of the 737 MAX.
The US airframer’s net losses in 2021 have more than halved to $ 4.29 billion compared to $ 11.94 billion in 2020. Its full-year 2021 revenues stood at $ 62.3 billion, and it has a net debt of $ 58.1 billion but with a healthy order backlog of over 4,200 commercial jetliners valued at $ 297 billion.
David Calhoun, President & CEO, Boeing, said the company generated robust commercial orders, including record freighter sales, as the commercial market recovery gained traction. Boeing added 900 (535 net) commercial aircraft orders last year. “Looking to our future, we’re sustaining and expanding key investments, including in our people, in sustainability, advanced manufacturing, digital engineering, supply chain capability, technology development and partnerships,” said Calhoun.
A Rebuilding Year
In a message to employees last week addressing the company’s Q421 results, Calhoun said 2021 was a key rebuilding year for Boeing, and significant hurdles had been overcome. The company secured orders for 164 737 MAX and 24 freighter aircraft and delivered 99 airplanes during the quarter.
“While we have more work to do, I am confident that we are well positioned to accelerate our progress in 2022 and beyond,” he said.
Boeing continues to work with the aviation regulators of countries worldwide for the global safe return to service of the 737 MAX. China which is one of Boeing’s key aviation markets, had its aviation regulator, the Civil Aviation Administration of China issue an airworthiness directive in December 2021, outlining changes required for Chinese airlines to prepare their fleets to resume service.
A positive aspect for Boeing, is increased 737 MAX production and deliveries with the jetliner having safely returned to service in nearly all global markets. The company delivered 245 737 MAX airplanes in 2021.
“Looking back at where we started, 2021 was a pivotal year for the 737 team,” Calhoun said. Order activity picked up significantly for the 737 MAX in 2021, with Boeing taking in 750 orders for the type, including Akasa Air’s order for 72 737-8 and 737-8-200s in November 2021.
The 737 MAX is vitally important for Boeing, which is producing the aircraft at a rate of 26 per month with work underway to increase the production rate to 31 aircraft per month over the next few months. The company is also evaluating the timing of further rate increases of the 737 MAX. In addition, Boeing still has an inventory of nearly 330 737 MAX aircraft that it built over the nearly two years that the type was grounded, and these are yet to be delivered to customers.
It has now been over a year, since the US Federal Aviation Adminstration (FAA) approved the return of the 737 MAX to commercial operations in November 2021 and since then, airlines have completed 300,000 revenue flights on the aircraft.
Calhoun said that 737 MAX fleet is performing very well with about 1,600 flights daily and having accumulated over 800,000 total flight hours since late 2020. According to Boeing, the reliability of the 737 MAX fleet remains above 99% as of January 24, 2022.
Another positive aspect for Boeing is the strong demand for air cargo which is driving orders for Boeing freighters. It received record orders for new and converted Boeing freighters in 2021, including 84 orders for 767, 777 and 747 freighters in Q4 2021. Boeing’s Global Services (BGS) team also announced 10 new converted freighter lines to meet the growing demand and delivered its 50th 767-300 converted freighter in 2021. With a well-balanced portfolio of both government and commercial offerings, BGS which bagged new commercial and government business valued at $6 billion in Q4 2021 is well positioned for growth in 2022 as the commercial market recovers.
Troubled Dreamliner
Boeing’s 787 ‘Dreamliner’ was a revolutionary jetliner, which on its entry into service not only delivered dramatic fuel-efficiency gains over previous generation jetliners but also provided an unmatched cabin experience before the arrival of the Airbus’ A350 XWB. Unfortunately for Boeing, the 787 programme whose development commenced in 2003 is unlikely to ever turn a profit and continues to be a drain on the company. Boeing halted 787 deliveries over production related issues in May 2021 and continues to perform rework on 787 airplanes in inventory. It is engaged in detailed discussions with the FAA regarding required actions to resume deliveries and now says that it has determined that these activities will take longer than previously expected. The attendant delays in customer delivery dates and associated customer considerations saw it record a $ 3.5 billion pre-tax non-cash charge on the 787 programmes in its Q421 results.
Boeing is continuing with very low rate 787 production with an expected gradual return to five aircraft per month over time.
“On the 787 programme, we’re progressing through a comprehensive effort to ensure every airplane in our production system conforms to our exacting specifications. While this continues to impact our near-term results, it is the right approach to building stability and predictability as demand returns for the long term. Across the enterprise, we remain focused on safety and quality as we deliver for our customers and invest in our people and in our sustainable future,” said Calhoun. According to estimates, Boeing now has over 100 787 aircraft on its inventory, which have not been delivered to airlines.
Boeing’s defence and space division is key part of the company’s business and generated $7 billion in orders in Q421, ending the year with a $ 60 billion order backlog of which nearly $ 13 billion was from overseas customers. Boeing delivered 47 total aircraft, including Japan’s first KC-46 mid-air tanker and the first P-8A Poseidon maritime patrol aircraft for Norway in the quarter, while also completing the first carrier tests for the MQ-25 unmanned aerial tanker and started flight testing on the second uncrewed Loyal Wingman aircraft.
New orders secured during the quarter include an award for six MH-47G Block II Chinook helicopters for the US Army Special Operations, a UK Ministry of Defence contract extension for Future Logistics Information Services, a Royal Saudi Air Force contract for modernisation of Airborne Warning and Control System (AWACS)and contracts for the company’s proprietary space programmes. However, Boeing took a $ 402 million pre-tax charge on the KC-46A Tanker programme, which has remained beset with issues. Boeing had won the US Air Force (USAF) tanker contract with the type under fixed-price terms in 2011 and has now racked up losses totalling over $5 billion on the KC-46 programme. The KC-46 is also being proposed for an Indian Air Force (IAF) requirement for mid-air refuelling aircraft.