The MAX Inventory at Boeing will be Growing |

One of the elements likely to be a fallout from the recent MAX 9 depressurization will be the speed at which Boeing can bring down its finished aircraft inventory and generate cash flow by delivering them to airlines.As of January 7th, Boeing had 185 finished 737 MAXs in inventory. The distribution of those aircraft by model is shown in the table below. Boeing began producing the MAX 7 and MAX 10 last year in anticipation of certification by year-end and completed 29 aircraft. That certification is contingent on the FAA approval of a request for a waiver by Boeing to allow an already known safety issue to be installed on early models and fixed later when a permanent fix is available. Given the latest problem with the MAX 9, that waiver now looks much less likely to be granted, in our opinion.The Boeing waiver request centers on the engine de-icing system and the engine nacelles made of composite materials. If the de-icing system is left in the on position longer than needed, the composite nacelles on the 737 MAX could overheat and lose strength. In the event of an uncontained engine failure, the weakened nacelle could fail and allow engine parts to penetrate the fuselage, causing an explosive decompression at altitude. A previous generation 737-700 flown by Southwest experienced a similar failure on April 17th, 2018, when a failure of the left engine resulted in a damaged nacelle that enabled engine parts to break a window, causing the aircraft to depressurize. One passenger was partially sucked out of the airplane and fatally injured.While uncontained engine failures are rare, they do occur. Twenty months earlier, Southwest had a similar failure on a flight from New Orleans to Orlando that also experienced a loss of cabin pressure and wing damage. Still, the crew could divert to Pensacola for an emergency landing safely. Given the decompression accident on the MAX 9, we believe the FAA will be less likely to grant the exception for the MAX 7 and MAX 10. At a minimum, the attention of Boeing engineers in devising a fix will likely take attention away from fixing the existing nacelle and engine de-icing issues and delay certification of the two new models by several months. In the worst case, the FAA could refuse to grant the exception Boeing has requested, forcing the company to address the known issue before the aircraft are allowed to enter service. This could result in six to twelve months of additional work. The problem with the nacelle issue is that it presents a single point of failure and adds to the workload for a pilot to monitor the anti-icing system more carefully. If a pilot were to turn on the anti-ice system but overlook turning it off when the aircraft emerges from known icing conditions, the nacelle strength could be weakened. As there is no warning system that the system has been on for an excessive period, this places another burden on the flight crew to manage during flight, increasing their workload in an era when automation to decrease pilot workload is the norm.The bottom line is we may find the 29 aircraft from uncertified models not being delivered anytime soon. Without the waiver, we’re looking at a 2025 introduction for the MAX 7 and 10, which would impact Boeing’s production ramp-up and cash flow and interrupt airline delivery schedules, with a particularly severe impact on Southwest and United.The MAX 8, MAX 8-200, and MAX 9 models in service will not be as severely impacted as the MAX 7 and 10. Nonetheless, additional delivery delays will likely occur as most of the 156 aircraft of those types are destined for China. The following table shows the distribution of aircraft in inventory by region, highlighting China as a key customer for the undelivered planes. 82.3%, or 121 of the 147 MAX 8s in inventory, have been built for Chinese airlines but not delivered. CAAC, the regulatory authority in China, was the first to initially ground the MAX after the two fatal crashes for the type and among the last to restore them to service. The Chinese government followed quickly to ban the MAX 9 after the most recent incident and has been delaying permission for airlines to resume deliveries of additional MAX models. We would expect this latest incident to provide Chinese authorities with an excuse to continue to utilize these aircraft as a political weapon in trade negotiations and withhold authority to complete the transactions into mid-2024, if not longer.The Bottom Line:With 121 additional aircraft also having deferred deliveries, 150 of the 185 737MAX models in inventory may not go anywhere quickly, negatively impacting Boeing’s cash flow in 2024. This will likely cause Boeing to miss its numbers again in early 2024 and may push some cash flow anticipated for 2024 into 2025.Boeing will likely continue to attempt to ramp production in 2024 but has been having difficulty in stabilizing a production rate that has been up and down with supply disruptions. Just as the company appeared to be closing in on an increase to 37 aircraft per month, additional delays have pushed this to the 2nd quarter. Will these new problems take resources from existing programs for retrofit work, and what impact might that have on the planned production rate increases? Stay tuned as we will look at those potential impacts as more information becomes available. At the least, we expect continued volatility in Boeing production rates in the first half 2024.

US Flight Planner - US DoT On-Time Data	Airbus vs Boeing - Official OEM Data
US Airline Schedule Performance - US DoT Data	Daily OEM Production & Deliveries -

Subscribe To Our Newsletter

Related News

Subscribe To Our Newsletter

Related News

Lufthansa Joins Emirates in Rejecting Early-Build 777-9s

FAA certifies Boeing 737 MAX 7; Crucial for Boeing

Boeing’s Seat AD Is a Minor Fix and a Timing Problem