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Boeing Cancellations Continue to Outpace New Orders

By Lou Whiteman – Aug 11, 2020 at 1:31PM

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The pandemic is punishing airlines, and reducing their need for new jets.

Boeing (BA 5.92%) in July recorded a sixth straight month with more cancellations of commercial aircraft orders than new orders being placed, a continuing pattern that reflects the impact the COVID-19 pandemic has had on the air travel industry.

The aerospace giant said Tuesday that customers canceled a total of 43 orders for its 737 Max in July, with an additional nine aircraft removed from its backlog due to customers facing financial challenges. The company received no new orders in the month. As a result, its total order backlog fell to a still-impressive 4,496 jets.

Boeing's 777 production line.

Image source: Boeing.

Airlines have been hard particularly hit by the pandemic, and with air traveler traffic volumes not expected to return to close to historic levels for years, the industry has put growth plans -- and plane purchases -- on hold. Boeing already was facing challenges with the 737 Max, which has been grounded since March 2019 after a pair of fatal accidents, and the pandemic has made the company's issues even more difficult to deal with.

Two years ago, Boeing had expected to be producing more than 55 737 Max airframes per month by now. Instead, it will build fewer than 80 in all of 2020, as it looks toward a goal of producing 31 per month by 2022.

The Max is not the only plane in the Boeing family under pressure -- the company intends to cut production on widebody planes as well due to falling demand.

While its massive 4,400-plane order backlog might seem reassuring to investors, it is important to note that many of those orders can be deferred by customers, so the backlog might not generate much revenue for Boeing during the downturn.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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