Boeing (BA -4.95%) finally resumed 737 MAX deliveries last month, following a 21-month hiatus prompted by two fatal crashes. The aerospace giant also received its first big 737 MAX firm order since the type was grounded in early 2019. Yet despite those milestones, December was a dismal month for Boeing from a high-level perspective. This highlights how the company continues to face a steep uphill climb even with the 737 MAX back in service.
The 737 MAX's bleeding hasn't stopped yet
In early December, Ryanair finalized a firm order to buy 75 737 MAX 200s, in addition to the 135 it already had on order. This deal seemed to give Boeing investors confidence that the tide was turning. In total, Boeing received firm orders for 82 737 MAX jets last month, more than it booked in the prior 23 months combined.
Yet even with this big uptick in order activity, Boeing ended December with 3,321 firm 737 orders in its backlog: 12 fewer than it had a month earlier. This wasn't because of a surge in deliveries, either. Boeing delivered just 28 737s last month: mostly to U.S. airlines.
This implies that Boeing brought in just 16 net orders for the 737 family last month, with its 82 gross orders largely offset by the removal of 66 other orders from the backlog. The parade of 737 MAX order cancellations, driven by the pandemic-related aviation downturn and the model's own shortcomings, hasn't ended yet.
Other models face their own challenges
Historically, Boeing's wide-body models (the 747, 767, 777, and 787 at present) have been a competitive strength. The company delivered 267 wide-body jets in 2015 and 258 in 2016, making up more than a third of its commercial jet deliveries in each year. Given that wide-body jets can sell for two or even three times the price of a narrow-body like the 737, wide-bodies likely accounted for more than half of Boeing's commercial aviation revenue in those years.
Had Boeing continued to post strong results in the wide-body market, it would have helped offset the costs of the 737 MAX debacle. However, parts of its wide-body business started weakening long before the pandemic, as airlines pivoted away from the largest jet models. A sharp drop in long-haul travel over the past year and production miscues have added to Boeing's problems.
As a result, Boeing delivered just 114 wide-bodies last year. The fourth quarter was particularly disappointing. On the company's Q3 earnings call, CFO Greg Smith predicted that Boeing would "have a big fourth quarter on deliveries" of the 787 Dreamliner. Instead, it delivered just four 787s during Q4, down from 45 a year earlier. Moreover, those were the only passenger wide-bodies Boeing delivered last quarter. It delivered 28 wide-bodies in total, but nearly all of those were freighters or military variants.
Inspections to address a variety of quality flaws weighed heavily on 787 Dreamliner deliveries in 2020. However, there's also a fundamental demand problem that won't go away for years (if ever).
An uncertain future for Boeing
To be blunt, Boeing's commercial jet operations are in disarray entering 2021. The 737 MAX backlog is still eroding, as Boeing has only a handful of major customers that are fully committed to the model. Rival Airbus has nearly twice as many narrow-body orders as Boeing in its backlog. With roughly 10,000 outstanding narrow-body orders across the full industry, most airlines have no need to buy more anytime soon.
As for the 787, Boeing may be able to clear out much of its backlog of undelivered planes during 2021. However, the company is slashing production to just six per month, down from 14 per month a year ago. Norwegian Air's decision this week to shut down its long-haul unit will put nearly three dozen 787s on the secondary market, which will weigh on future sales. Finally, Boeing may owe airlines substantial compensation related to the costs of extra inspections for their 787 fleets.
Boeing's 777 family also faces big challenges. While freighter demand is supporting a modest level of production, the first delivery of the next-generation 777X has already been delayed from 2020 to 2022 and could slip further. Few if any airlines will want to take delivery of a plane that large until there's a robust recovery in long-haul international travel.
Boeing stock has fallen a little more than 50% from the all-time high it reached in early 2019. Considering the huge increase in its debt load since then and its weak recovery prospects, investors should still stay away.