There has been some interesting and mixed news flow around Boeing (BA 2.34%) recently. While what is being reported about the aerospace giant isn't coming from official sources at the aerospace giant, the assertions still come from credible sources, and they touch on key company objectives.
To summarize the three main narratives:
- A Reuters article cited a White House official who stated that deliveries of the two Boeing VC-25B planes that will serve as the next "Air Force One" could be delayed until 2029, after Boeing's previous delays pushed the delivery dates into 2027 or 2028.
- A Bloomberg article claimed that key airline customer Emirates now expects that deliveries of the 205 Boeing 777X widebody jets it ordered won't begin to take place any sooner than the second quarter of 2027, and possibly won't start until 2028.
- Safran CEO Olivier Andries made public statements expressing confidence that Boeing will hit a delivery rate of 38 a month on the 737 MAX in the first half of 2025 and 42 a month by the end of the year.
All of these issues are connected to things that Boeing will need to do if it's going to convince investors that it's back on the right track. Unfortunately, the first two narratives cast some doubt on that premise.
NYSE: BA
Key Data Points
Air Force One delays
The Air Force One program is one of four highly problematic fixed-price development programs at Boeing Defense, Space & Security (BDS). The others are the KC-46 refueling tanker, T-7 training aircraft, and the MQ-25 refueling drone.
While these programs only account for 15% of BDS revenue, they have generated multibillion-dollar losses and charges over the last few years. The Air Force One news is unfavorable, but if Boeing had to choose which of these four programs it was going to face delays on, it would probably be that one, because the potential longer-term demand for the other types of aircraft in development is greater.
Image source: Getty Images.
Boeing 777X timeline
On Boeing's latest earnings call at the end of January, CFO Brian West confirmed that flight testing had resumed on the 777X and said that "we still expect the first delivery in 2026." Unfortunately, the commentary from someone close to the people doing the planning at Emirates offers a reason to doubt that timeline.
The 777X is the successor to the 777, and it was initially supposed to come into service in 2020, helping to drive the next cycle of widebody airplanes. Moreover, Emirates is Boeing's key customer for the 777X, responsible for 205 of the 481 unfilled orders on the plane currently standing. Only Qatar Airways' 94 orders come anywhere near the Emirates contract. In other words, Emirates matters to Boeing and the 777X.
If 777X deliveries face further delays, it opens up the possibility that Boeing will have to make payments to airlines to compensate them for having to reorganize their fleets, schedules, and growth plans. Those delays would also hit Boeing's cash position as it would have to hold its 777X inventory for longer. And that doesn't even touch on the company's increased development and testing costs.
Image source: Boeing.
Good news on the 737 MAX
Safran is the joint-venture partner with GE Aerospace in CFM International, which is the sole provider of the LEAP engines used on the 737 MAX. GE CEO Larry Culp expects CFM to increase its LEAP production by 15% to 20% this year, and believes that target aligns with production plans at Boeing and Airbus. (The LEAP is one of two engine options for the Airbus A320 neo.)
On GE's fourth-quarter conference call, Culp wouldn't be drawn out about precisely how CFM expected to split its LEAP deliveries between Boeing and Airbus in 2025, beyond simply stating that it was "well aligned to support both of them as they step up production this year." However, the recent commentary from Safran's CEO was positive, and offers a reason to feel confident that Boeing will be able to ramp up 737 MAX production in line with management's plans.
What all this means to investors
If it turns out to be true that the new Air Force One jets face additional delays, that wouldn't be a positive for Boeing, but it's unlikely that it would be hugely significant to the company's big-picture situation over the long term. However, if the 777X's first delivery date is pushed back again, Boeing is likely to face more charges, and may see some orders delayed or cancelled. That's something investors will want to keep an eye on.
On a brighter note, the delivery rate on the 737 MAX is the most crucial statistic for investors to watch. Suppose Boeing can hit a rate of 42 a month by the end of the year. In that case, investors can start penciling in more optimistic assumptions for Boeing Commercial Airplanes' profitability and cash flow. That would be a significant plus, and would enhance the stock's near-term prospects.
