Market forces work to trim civil aircraft production and push out deliveries

Over the past month we have been making tweaks to our forecast which reflect some of the developments we’ve been seeing over the past few months.

A lot of ink has been spilled over the Alaska Air door plug blow-out which we don’t need to re-hash here. But the aftermath is continuing to have consequences that reverberate through the industry that only with the passage of time are becoming clearer. As it became glaringly obvious that traveled work was a quality problem, Boeing has slowed down 737 MAX production in order to make sure fuselages arriving from Wichita didn’t need to be re-worked. As a result, we have again cut our 737 MAX delivery forecast for 2024 by 40 aircraft, the decline coming entirely from production deliveries. For the time being, we’re being optimistic that Boeing will – eventually – get its act together and will start delivering all the 737 MAXs that we had in our original 10-year forecast in January, they are just going to get pushed out later into the 2020s.

The blow out also is delaying certification of the -7 and -10 variants while Boeing “does the right thing” and fixes the nacelle icing issue before getting those aircraft certified. We don’t distinguish between the variants in our forecast, but we don’t believe this will have a material impact on overall MAX deliveries as it appears Boeing will try to supply -8s to the -7 folks (mostly Southwest) and -9s to the -10 folks until the others get certified. Anyway, Boeing has a backlog that we estimate will take seven to eight years to burn off, and with traffic recovering at the rate that it is there are probably a number of customers who would gladly take aircraft earlier if given the opportunity. Could -10 customers cancel and order A321neos? Sure, but they probably won’t get their neos any faster than their -10s. Airbus has an eight to nine years backlog in narrow bodies.

The blow out also has heightened scrutiny of Boeing’s other big program, the 787. It’s not clear, yet, whether all this scrutiny will affect output, and for the moment we haven’t changed our near-term forecast. Boeing did admit in their last earnings forecast that production was being hampered by supply issues, so there is some risk there that 787 deliveries might come up short by year end.

It might be coincidental, but with greater attention being placed on Boeing, regulatory resources seem to becoming stretched such that development programs will probably take longer than expected. We note some concern among Boeing’s 777X customers that first deliveries might now be delayed until 2026. We’ve started trimming our 777X delivery forecast for 2025, and there’s a possibility we may again this year if we don’t see any movement on certification. The thing to watch will be FAA issuing the Type Inspection Certificate (TIC), that gets the certification process started. Prior to the blow out, it appeared Boeing was confident the TIC would be issued imminently but almost five months into 2024 they still don’t have it in hand.

Other programs that are in the works could also get delayed. Dassault’s Falcon 10X appears to have slipped a year, and EIS of the Gulfstream G800 and Bombardier Global 8000 could slip as well. The Gulfstream 700 did finally get its ticket at the end of March, but Gulfstream had been expecting that since the middle of last year. Gulfstream’s working assumption is that the G800 would be certified a year after the G700, but we’re regarding that as optimistic. Other programs that could possibly face near term regulatory delays include the G400, Beech Denali and Cessna Ascend. Rotorcraft in development include Leonardo AW09 and AW609 and the Bell 525. Airbus Helicopters is waiting on U.S. certification for its H175.