MAX Production, Deliveries and Inventory Levels

One of the many databases available to AirInsight subscribers is our Production and Deliveries data model. This model, readily accessible on the website, can be easily customized to your analytical needs and covers aircraft currently being produced by Airbus, Boeing, Comac, and Embraer. We monitor aircraft production daily and utilize the first flight as a surrogate measure of completion. While additional work may continue beyond the first flight, it remains our best surrogate for data typically kept close to the vest by OEMs. The 737 MAX is perhaps the most interesting aircraft to examine, given the ups and downs in both production and deliveries. The data reveal the massive buildup and reduction in inventories that occurred after the crashes and subsequent grounding of the aircraft, as well as the impact of the global pandemic, the decompression incident, and the IAM strike. While deliveries are considered crucial to airlines and end users, production is the key statistic for the supply chain, which often needs to produce with lead times that can be months before an aircraft is completed. Tracking actual production rates is critical to suppliers, particularly compared to OEM guidance. If the OEM produces less than its guidance, inventories will likely be built, which is not sustainable over the long term. As a result, suppliers need accurate estimates of what is happening at the OEM and what production rates will likely be based on more realistic assessments than OEM forecasts. Our data model and database, ideal for market intelligence, can be customized by OEM and individual models. For Boeing, we can analyze our data to detailed levels. For example, we can segregate the MAX models by type, which reveals that 25 MAX 7 models have been produced and are waiting for the modification to the engine nacelle and final certification before they can be delivered. Similarly, for the Airbus single-aisle family, we can segregate the data by model and whether they are powered by CFM LEAP or Pratt & Whitney GTF engines. Our tools can be handy for Airbus, Boeing, Comac, and Embraer suppliers. 737 MAX Let’s examine the 737 MAX in greater depth. By the end of 2024, Boeing had produced 1,790 737 MAX aircraft, of which 1,681 had been delivered. At year-end, 109 aircraft remained in inventory. The following table summarizes production, deliveries, and inventory by year since the program's inception in 2016. [caption id="attachment_89161" align="aligncenter" width="640"] source: AirInsight[/caption] The following chart graphically shows the same data, including the rapid rise and subsequent decline of completed aircraft inventories to a level that should be liquidated in 2025. Supply chain clients frequently ask us what we believe Boeing’s production rate will ramp up to in 2025 and how quickly that ramp-up will happen. [caption id="attachment_89162" align="aligncenter" width="640"] source: AirInsight[/caption] We can break down the data by date, as required. By summarizing the data by month, we can quickly identify the period during which the MAX was grounded, during which aircraft production continued even while deliveries could not be made, when that production stopped, and the impacts of the pandemic and IAM strike. Production is Key The following table shows aircraft production by month during the period. Production peaked during the last half of 2019, with the highest rate at 46 aircraft produced in October, during a year in which the production rate averaged 38 jets per month. Notably, the FAA has established rate 38 as the highest Boeing can ramp to under current FAA supervision. The agency has not indicated any willingness to raise that level until Boeing completes its process improvements and cultural changes to place safety over profits. [caption id="attachment_89163" align="aligncenter" width="1157"] source: AirInsight[/caption] Deliveries generate much-needed cash flow OEMs earn a significant portion of an airplane's purchase price on delivery, and Boeing's cash flow suffered when it could not deliver the MAX during aircraft groundings. Deliveries for the MAX include delayed deliveries from inventory, and given the inventory build-up during the grounding of the MAX, deliveries can often exceed production significantly. The following table shows Boeing’s MAX deliveries from April 2019 to October 2020, during which the aircraft was grounded with no deliveries. Deliveries also dropped in the last quarter of 2024, as the IAM strike impacted production. Only a few aircraft, either new or from inventory, were built and delivered in October and November. [caption id="attachment_89164" align="aligncenter" width="1138"] source: AirInsight[/caption] Inventoried Airplanes are costly from a cash flow standpoint As newly produced airplanes are delivered, there will always be short-term inventories, typically lasting a few days to a couple of months. The MAX crashes fueled the crisis, which caused inventory levels to balloon after a 19-month grounding to a peak of 441 aircraft. Since then, inventories have come down, and airplanes are turning from cash costs to revenue sources as they are sold. Thus, the outlook for the MAX program is improving. The following table shows Boeing’s MAX inventory levels since production started. While most of the production has been the MAX 8 variants, 25 MAX 7s, and 3 MAX 10s are currently in inventory and cannot be delivered until FAA certification is completed. Boeing has certification scheduled for 2025 after dropping a request for an exemption to a nacelle issue currently in final certification testing. Certification would likely result in the rapid delivery of 25 MAX 7s to Southwest Airlines in the following quarter. [caption id="attachment_89165" align="aligncenter" width="1142"] source: AirInsight[/caption] Notably, Boeing has brought down the MAX inventory level from its peak of 441 aircraft to only 109 aircraft at the end of 2024. This year, we could see most of the remaining inventory delivered and moving back to the usual short time frame between production and delivery, typically under 60 days. The Bottom Line In 2025, Boeing has an opportunity to significantly increase its production rate, perhaps 50% higher than 2024 levels. If all goes well, the company could reach 2023 levels, averaging 29 aircraft per month, but that will require several factors to fall into place, which may or may not occur. We expect lower totals in the early part of the year. By the end of the year, rates will increase closer to, but not quite reach, the FAA-imposed maximum of 38 aircraft per month. Depending on the new administration in Washington and Boeing's evident importance to our international trade balance, we may see the threat of tariffs and retaliation against Boeing as possible outcomes in 2025. Given Boeing's significance to the economy, it is difficult to imagine the Trump 2.0 administration taking a hard-line position that would harm the company. A stronger FAA oversight presence, which is still needed based on the Alaska Airlines door plug blowout, would continue to constrain Boeing production rates in 2025 as safety oversight increases. Conversely, a weaker FAA presence could see higher rates based on increased confidence in the delegated authority process under Kelly Ortberg’s leadership at Boeing. At this point, we have no clear evidence of the new administration's direction. As the situation evolves, please keep checking our models, which are updated daily and could provide early warning of changes in direction.

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