Over the past year, regulators in many major markets have recertified the Boeing (BA 1.08%) 737 MAX for commercial service. Meanwhile, airlines have begun rebuilding their fleets this year as air travel demand has started to bounce back from the COVID-19 pandemic.
This should have laid the foundation for a strong recovery in Boeing's commercial jet deliveries in 2021. Instead, the aircraft manufacturer has struggled to clear its massive backlog of undelivered jets. The slow pace of aircraft deliveries -- compared to historical levels as well as top rival Airbus' (EADSY 1.77%) results -- continued last quarter.
Delivery activity remains slow
In the first quarter of 2021, Boeing delivered 77 commercial jets, down from a Q1 peak of 184 deliveries in 2018. It didn't do much better in the second quarter, delivering 79 commercial aircraft.
The slow pace of recovery continued in the third quarter. On Tuesday, Boeing announced that it delivered 85 commercial jets during the period.
Image source: Boeing.
Making matters worse, the product mix weakened sequentially. Boeing delivered just 19 wide-body jets last quarter -- down from 29 in the second quarter -- largely because the company was forced to halt deliveries of the 787 Dreamliner for the entire quarter. Wide-bodies typically sell for at least twice as much as narrow-body jets like the 737 MAX. As a result, while Boeing handed over more commercial jets last quarter than in Q2, the value of the aircraft it delivered actually decreased sequentially.
Airbus continued to run circles around its American rival. The European aircraft manufacturer delivered 127 commercial jets last quarter, bringing its delivery total for the first nine months of the year to 424. (For comparison, Boeing has delivered 241 commercial jets year to date.) That said, Airbus' product mix leans even more heavily to narrow-bodies than that of Boeing. Airbus delivered just 10 wide-bodies in the third quarter.
The 787 Dreamliner suffers another setback
Boeing shareholders got more bad news last week, as the company discovered a new quality issue affecting the 787 Dreamliner. Certain titanium parts used in production since 2018 may be weaker than they are supposed to be, according to The Wall Street Journal.
This issue should not impact the near-term flight safety of in-service jets. However, the suspect parts will likely need to be replaced or inspected more frequently in the future, adding to Boeing's costs.
Image source: Boeing.
In the near term, this setback will further delay the resumption of Dreamliner deliveries to November at best. Given the practical limitations on how many 787s Boeing can deliver in a month, it now seems likely that the company will end 2021 with even more undelivered 787s in its inventory than the roughly 80 it had at the beginning of the year. Furthermore, the incremental delay adds to the risk that airlines will exercise contractual rights to cancel orders penalty-free.
A step backwards on financial metrics?
In the second quarter, Boeing surprised analysts by reporting a profit. Cash burn also slowed to $705 million following a string of multibillion-dollar quarterly cash outflows.
However, the continued slow pace of jet deliveries -- and the outright halt in 787 Dreamliner handovers -- doesn't bode well for the company's upcoming earnings report. Adding to the pressure, deliveries of military aircraft declined compared to the first two quarters of 2021. Boeing also scrapped a planned test flight for its Starliner space capsule in August due to a problem with its fuel valves. Fixing the issue has proved challenging (and likely expensive).
Once again, Boeing shareholders will have to hope that the current quarter proves better than the one that just ended. With a massive debt load that seems to grow every quarter -- whereas key rival Airbus has more cash than debt -- Boeing needs to make faster progress on its turnaround.
