Yesterday Boeing announced its quarterly earnings. Reaction to the news was mixed, but overall it was a downer.  What we find most interesting is Boeing’s MAX delivery target. 

Boeing lowered its MAX delivery target twice this year. The first target was 500, now it is 375.  The production rate will remain at ~30 per month.  What do delivery rates look like YTD (through Oct 26)?

The table is from our 2022 Delivery Tracker, which is updated daily.  Through yesterday, we estimate Boeing has delivered 294 MAXs.  Of our estimated 345 commercial models, Boeing has delivered YTD, 85% have been MAXs.  This underscores how important the MAX is to Boeing’s commercial aircraft business.  This is why there was a negative market reaction yesterday – anything that slows MAX deliveries causes a nervous reaction.  There is little Boeing can do to push their supply chain.  On our last visit to Renton, it was clear the factory is being managed carefully.  It is not just the supply chain, but also the need for skilled labor on the line.  Boeing is being very careful with Renton’s production.  The MAX is a sensitive issue (as we saw with the market reaction yesterday) and Boeing manages program risk with abundant care. Chief Financial Officer Brian West said yesterday during the earnings call that Boeing will share new insights into future production rates at its Investor’s Conference on November 2.

Over 299 days this year, Boeing delivered an average of one MAX per day. There are 66 days left and one would suppose another 66 deliveries to go before year-end.  That takes us to 360 for the year, which would be 15 short of the revised target of 375. This gap is, in our view, easily closed.  Moving engines from undelivered aircraft previously destined for customers that went out of business or planned for delivery to Chinese airlines, we expect to see these 15 required deliveries made by December 31.  

The “other shoe” is the MAX 7 and MAX 10.  Boeing is still messaging confidence.  The crucial play now is encapsulated by this: “United in 2017 ordered 100 MAX 10s. Without an extension United would convert some orders to MAX 8 and 9s, Kirby said, “and we’re going to buy more Airbus 321 airplanes,” which would impact Boeing’s U.S. workers. Calhoun said he did not “want to forecast dire outcomes but Scott’s pretty right about what he sees.”  Conversions from MAX 10 to MAX 8 and MAX 9 will likely mean discounted pricing.  And, of course, the effervescent bugbear called A321, will be played to maximum effect. Who’s for another round of poker?

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Co-Founder AirInsight. My previous life includes stints at Shell South Africa, CIC Research, and PA Consulting. Got bitten by the aviation bug and ended up an Avgeek. Then the data bug got me, making me a curious Avgeek seeking data-driven logic. Also, I appreciate conversations with smart people from whom I learn so much. Summary: I am very fortunate to work with and converse with great people.

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