MAX progress at Boeing – slow, but there is progress

The Boeing turnaround is probably the most watched commercial aviation event these days. We don't know of one entity that doesn't want this to happen, and ideally, it should happen faster rather than slower. We monitor the situation via production and deliveries. Here's what we see to date. In our view, the most critical program to watch is MAX. The models to watch most closely are MAX 8 and MAX 8-200. That program's focus points are deliveries to North America (the most extensive customer base), Europe (essentially Ryanair), and China. North America [caption id="attachment_89236" align="aligncenter" width="640"] AirInsight[/caption] Focus on the upper two charts and the right-hand side. Boeing is improving its delivery rates. We want to see those two curves descend and, ideally, be under 30 days. We want to see a steady increase in deliveries on the bottom chart. The charts above focus on the MAX 8 and 8-200. The North American market is also vital for the MAX 9. Below, we offer the same chart as above, but for the MAX 9. [caption id="attachment_89237" align="aligncenter" width="640"] AirInsight[/caption] Although the volume of deliveries is lower than for MAX 8, the trends in delivery days are better. Moreover, the trend lines are dropping, which is a good sign. Given the market interest in larger single-aisles and the absence of the MAX 10, this model is Boeing's best option. The volume is nowhere near as high as the A321neo. That is a problem we and others have brought up repeatedly. There is no short-term solution but to get the MAX 10 certified ASAP. However, on the bright side, Boeing is getting the MAX 9 delivered faster. Europe [caption id="attachment_89238" align="aligncenter" width="640"] AirInsight[/caption] The charts show trends similar to those in the North American market. Focusing on the end of the two upper curves, we see the delivery rates are improving. The third chart shows the improvements are in low volumes, but we see a positive aspect. The following chart provides context on Michael O'Leary's incessant complaints about late deliveries—the chart lists Boeing's three biggest MAX customers. [caption id="attachment_89239" align="aligncenter" width="640"] AirInsight[/caption] United has far more reason to be annoyed with Boeing. Ryanair is getting the same delivery rates as Southwest. Does this absolve Boeing from its contractual commitments? Of course not. But the chart puts those complaints in perspective. China [caption id="attachment_89240" align="aligncenter" width="640"] AirInsight[/caption] Let's face it: those curves look bad. The middle chart shows that the MAX was doing great until the grounding. Deliveries took years to restart, and rates were anemic. Is this a Boeing problem or a China problem? Increasingly, it is a China problem. Boeing has over 50 MAXs ready to go to Chinese customers. There were many more, but Chinese recalcitrance allowed Boeing to move them to India. The CAAC controls China's aircraft imports. If state policy is to irritate the US, then the CAAC does what it must. China is an important market for Boeing. The following chart shows its crucial role in the MAX program. [caption id="attachment_89241" align="aligncenter" width="640"] AirInsight[/caption] The Chinese lockout of the MAX benefitted India. Now, India's airlines are growing as fast as China's. China's loss is India's gain, which is also significant for Boeing. Indeed, Boeing was able to deliver to Indian airlines faster than Airbus. This is why we see upstart Akasa appear out of nowhere and now start international service. It is also how we see Air India Express quickly ramp up. IndiGo is Airbus's largest Indian customer, with a ~60% market share. However, that market share has dropped due to the sharp growth at Akasa and Air India. Summary Sometimes, studying OEM programs requires some tea leaf reading. Our reading of the tea leaves suggests that Boeing has bottomed out and is turning around. To be clear, given the history, the MAX program is one mishap from another disaster. However, if Boeing now has a handle on quality control and MAX has no further hiccups, we can see Renton start accelerating deliveries. If the MAX 7 and MAX 10 are certified and the Everett FAL goes online, MAX deliveries could accelerate quickly. The FAA limit remains in place, but even at 38 per month, that means a potential 500 deliveries over 12 months—a vast improvement over the past few years.

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