Boeing's Latest Announcement and Its Impact on Financial Backers
Recent news surrounding Boeing (BA -2.06%) has been a mix of intriguing reports, although they originate from sources outside of the company itself. Here are the key takeaways:
- A report from Reuters cites a White House official stating that the delivery of the two VC-25B planes, destined to serve as the next "Air Force One", may be delayed until 2029. Previous delays had pushed the delivery dates into 2027 or 2028.
- Bloomberg reported that Emirates, a major airline customer, now anticipates that the commencement of deliveries for its 205 ordered Boeing 777X widebody jets will not happen before the second quarter of 2027, and might not start until 2028.
- Safran CEO Olivier Andries expressed confidence that Boeing will attain a delivery rate of 38 per month on the 737 MAX in the first half of 2025 and reach 42 per month by the end of the year.
These issues are pivotal to Boeing's aim to prove it's back on track, but the first two narratives cast some uncertainty on that notion.
Air Force One Delays
The Air Force One program is part of four challenging, fixed-price development programs under Boeing Defense, Space & Security (BDS). These also include the KC-46 refueling tanker, T-7 training aircraft, and the MQ-25 refueling drone. Despite only accounting for 15% of BDS revenue, these programs have generated multibillion-dollar losses and charges over the past few years. With the potential demand for other types of aircraft in development being higher, Air Force One delays seem the least concerning.
Boeing 777X Timeline
On January's latest earnings call, CFO Brian West confirmed that flight testing on the 777X had resumed, and they still expect the first delivery by 2026. However, Emirates' commentary casts doubt on this timeline, suggesting 777X deliveries may be further delayed and lead to reorganization and payment obligations for Boeing if airlines need to adapt their fleets.
Good News on the 737 MAX
Safran, a joint-venture partner with GE Aerospace in CFM International, which is the sole provider of LEAP engines used in the 737 MAX, expects to increase its LEAP production by 15% to 20% this year. Positive comments from Safran's CEO suggest Boeing will be able to ramp up 737 MAX production as planned, boosting investor confidence.
In summary, while delays in the Air Force One program may not be significant, further delays for the 777X could impact Boeing's financial outlook. Consistent delivery rates for the 737 MAX are essential to maintaining investor confidence and enhancing Boeing's financial performance.
- Given the potential delays in the Air Force One program, some investors might consider reorganizing their finance strategies, as the delays might not significantly impact Boeing Defense, Space & Security's revenue share.
- The delayed delivery of the Boeing 777X jets, as suggested by Emirates, could result in payment obligations for Boeing if airlines need to restructure their fleet plans, which might in turn influence investing decisions.
- With Boeing aiming to increase the delivery rate of 737 MAX to 42 per month by the end of 2025, positive assumptions about the production of LEAP engines by Safran could potentially offer investors assurance and bolster their confidence in Boeing's financial future.
- Looking ahead to 2025, Boeing's investment opportunities might hinge on the successful execution of the 737 MAX production ramp-up, as delivering on this promise could positively impact Boeing's financial prospects and attract more investors.
