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The Boeing 767: An Unlikely Port in the Current Storm

By Adam Levine-Weinberg - Jun 27, 2021 at 10:04AM

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While most of Boeing's commercial jet programs are struggling, the aerospace giant has doubled production of the Boeing 767 since 2015.

Boeing (BA -0.88%) has been building the 767 for four decades: an incredibly long time for a single generation of a commercial jet. In theory, it ought to be obsolete: Boeing and top rival Airbus have each introduced multiple new wide-body jet models since the 767 entered service in 1982. Yet despite the model's age, the 767 is still going strong, with a steady stream of orders and deliveries. Indeed, it has become an increasingly important contributor to Boeing's financial results lately. Let's take a look.

An unlikely recovery

Boeing began developing the 767 nearly half a century ago. The model sold well during the 1980s and 1990s, but demand plunged after the 9/11 attacks decimated the global airline industry. The launch of the 787 Dreamliner a few years later caused demand to erode further.

Indeed, whereas Boeing booked 242 gross orders for 767s between 1997 and 2001, the 767 family brought in just 55 orders between 2002 and 2006. Meanwhile, 767 deliveries plunged from an average of more than 40 per year between 1997 and 2001 to an average of just 11 annually from to 2004 to 2010. The 767 appeared to be well past its prime and nearing the end of production.

Yet the aging 767 has experienced a renaissance of sorts over the past decade. First, in early 2011, the U.S. Air Force selected Boeing's KC-46 Pegasus tanker -- a modified 767 -- to replace 179 of its KC-135 tankers. Second, FedEx and (to a much lesser extent) other cargo airlines ordered a slew of 767-300F freighters, mainly to replace older, out-of-production models. Between 2011 and 2020, FedEx alone placed firm orders for 130 767-300Fs.

A FedEx Boeing 767-300F in flight, with clouds in the background.

Image source: Boeing.

To meet this demand, Boeing has gradually increased 767 production in recent years. In 2015, it was building 767s at a rate of 1.5 per month and delivering them at an even slower pace. By 2020, Boeing had doubled its 767 output, building three per month. And in recent years, 767 deliveries have roughly matched official production rates.

A steady contributor

Between 2018 and 2020, Boeing delivered 100 767s: an average of 33 per year. United Parcel Service took 10 of those, with the other 90 split about evenly between FedEx and the Air Force. Having steady customers for the 767 has been invaluable, as Boeing's passenger jet models have all run into trouble over the past few years.

Five years ago, Boeing was building more than eight 777s and 12 787s per month, compared to just two 767s. But a sharp drop in demand for passenger wide-body jets has forced the industrial giant to slash the 777 and 787 production rates to just two and five per month, respectively. Moreover, Boeing 737 deliveries slowed dramatically in 2019 and 2020 due to the 737 MAX grounding. That makes the 767 Boeing's only commercial jet program to increase its production relative to 2016.

Boeing should be able to maintain its current 767 production pace for at least a few more years. It still has more than 130 KC-46 tankers in the pipeline, all of which should be delivered by 2028. That translates to annual output of about 18 767s. Boeing has also captured a handful of international orders for the KC-46. Finally, FedEx has 50 767-300Fs on order for delivery over the next four years, after exercising options to buy another 20 earlier this month.

A Boeing KC-46 Pegasus tanker refueling another military jet in flight.

Image source: Boeing.

All good things must come to an end

The Boeing 767 still has a few good years in front of it. But after 2028, its future becomes murky.

For one thing, Boeing will finish building the 179 KC-46 tankers ordered by the U.S. Air Force around then. Perhaps the Air Force will order more or big international orders will finally start rolling in -- but there are no guarantees. Meanwhile, the 767-300F does not comply with new emissions standards promulgated by the International Civil Aviation Organization. Barring a change in the rules, that means production must cease before Jan. 1, 2028.

Unless Boeing gets a lot more KC-46 orders, it will likely sunset 767 production by 2030. Even in a best-case scenario, it would probably need to slow production compared to the current rate of three per month. But no matter what the future holds, the Boeing 767 will go down in history as a highly successful model with remarkable longevity.

Adam Levine-Weinberg has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends FedEx. The Motley Fool has a disclosure policy.

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