By Doug Cameron and Robert Wall
Boeing Co. is poised to lose its place as the world's largest
plane maker to Airbus SE after a reign of seven years, as its
jetliner deliveries fell by more than a third in the first half of
2019 with the grounding of its 737 MAX aircraft.
The U.S. aerospace giant's best-selling MAX has been barred by
safety regulators from flying passengers for almost four months,
far longer than Boeing, its investors and airlines expected.
Consumers have expressed misgivings about getting on the plane
again, and a dearth of new sales to carriers has helped drain about
$50 billion from Boeing's market value since it peaked in
The company's delivery slump has reverberated across an
aerospace industry that had been enjoying an unprecedented
decadelong boom. Some suppliers have been forced to trim output and
idle staff, while airlines have had to cancel thousands of flights
and seek compensation from the plane maker.
More than 150 undelivered MAX jets are parked at sites around
the U.S., along with the 380 in airlines' hands that were grounded
by regulators in March. The flight ban followed a fatal crash of a
MAX that month in Ethiopia, less than five months after one in
Indonesia. The accidents took 346 lives. Boeing faces multiple
lawsuits from victims' families.
For the third straight month, Boeing reported on Tuesday no new
orders of MAX aircraft, and its first-half deliveries overall fell
to 239 planes, from 378 in the same period last year.
Analysts don't expect regulators to clear the MAX to fly again
before the end of September as Boeing continues work on fixes to
the aircraft's flight-control systems. That leaves the
Chicago-based giant with a huge backlog of planes that won't be
delivered and paid for until well into 2020.
European rival Airbus shipped 389 planes through June and is on
track to deliver a record number of jets this year after largely
shaking off an array of production problems, including shortages of
engines and interior parts. Airbus already has made public plans to
further raise output of its best-selling A320neo, the direct rival
to the MAX. Boeing has said it is focused on returning the MAX to
airline service and will address production plans once that has
Boeing and Airbus have been engaged in a fierce battle over the
past decade to scoop up orders for new jets from fast-growing
airlines, especially in Asia. Combined they have amassed a backlog
of almost 13,000 planes -- or about seven years of production for
Boeing delivered more jets than Airbus in 2012, regaining the
crown from its European rival after a decade in second place.
Boeing has also led in orders and deliveries for larger planes such
as its 787 Dreamliner and 777, which are typically more profitable
than the workhorse single-aisle aircraft.
The MAX crisis has halted Boeing's advance, wounding its
reputation and leading to a flurry of compensation claims from
airlines hit by the grounding as well as litigation from the
families of the people killed in the two crashes.
Boeing now builds its 737 jets at a rate of 42 a month after
cutting output by almost a fifth in April and shelving its plan to
boost production. The undelivered planes are draining Boeing's
closely watched cash flow, which has been used to fund huge share
buybacks and higher dividends.
Analysts expect Boeing to burn cash this year and increase its
debt, adding to the pressure to deliver its 787 Dreamliner jets,
aircraft services and defense equipment. It handed over a record 18
Dreamliners in June after boosting monthly production to 14. At the
same time, the loss of MAX orders could translate into lower sales
of services to airlines.
The company is scheduled to release second-quarter earnings on
July 24, including the cash outflow impact from the MAX grounding.
Analysts also expect a potential second charge from the cut in 737
production following a $1 billion earnings hit announced in
Airbus, based in Toulouse, France, has set a goal of delivering
up to 890 planes this year, which would be an industry record.
Boeing, which had planned to ship as many as 905 airliners this
year, has suspended delivery guidance because of the MAX
Airbus hadn't built half that number at the midyear mark, though
that isn't unusual for a company that typically scrambles to hand
over a large number of planes to airlines in the final weeks of the
Even once regulators clear the MAX to resume carrying
passengers, it could take months to return all of the idled planes
to service. Analysts said it could take a couple of years before
Boeing gets MAX deliveries back on schedule.
The two plane makers face some shared challenges. Airlines have
slowed their plane-buying spree as global trade tensions rise,
particularly between the U.S. and China, the world's two largest
airplane markets. The 560 orders and commitments made public by the
two rivals at last month's Paris Air Show was the lowest total at
the biennial industry jamboree since 2009.
The International Air Transport Association, a trade group, last
month trimmed the outlook for global airline profits this year by
21% to $28 billion. Airlines posted around $30 billion in combined
profit in 2018.
Boeing this week lost a potential order for 50 MAX planes from a
Saudi Arabian budget carrier. Flyadeal said it would instead buy up
to 50 A320neo planes from Airbus, its existing supplier. Two
Indonesian carriers have said they are considering canceling their
Boeing's official order book doesn't yet reflect a blockbuster
deal for 200 MAX planes from British Airways parent International
Consolidated Airlines Group SA announced at the Paris show. That is
the first -- and only -- MAX deal since March, when the fleet was
Airbus took in 88 net orders in the first half, compared with
261 for the year-earlier period, in another sign of overall
Boeing shares have fallen by about 18% since they peaked in
March, just before the Ethiopian Airlines crash on March 10. Airbus
shares are trading near their all-time high and are up more than
47% this year.
Write to Doug Cameron at firstname.lastname@example.org and Robert Wall at
(END) Dow Jones Newswires
July 09, 2019 19:31 ET (23:31 GMT)
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