Boeing may slow down the rate of 737NG deliveries this year due to a demand shortfall in the 18-month bridge to the arrival of the re-engined 737 Max, UBS analyst David Strauss says.
Strauss’ analysis in a new research note to clients may help explain the apparent mystery behind last week’s guidance update from Boeing. After delivering 762 commercial aircraft in 2015, Boeing now plans to deliver between 740-745 aircraft in 2016.
The year-over-year reduction startled investors when it was revealed on 27 January, sending Boeing’s share price nearly 9% lower by the end of the day. The expectation of fewer deliveries clashes with Boeing’s planned production rate increases on the 767 and 787 lines in 2016, which offset lower output on the 747-8 line.
Boeing chief executive Dennis Muilenburg attributed the lower delivery guidance partly on the introduction of the 737 Max flight test aircraft this year and the planned ramp-up of the re-engined model ahead of entry into service in 2017.
But Strauss points out that the four flight test aircraft were “mostly built” already in 2015. Moreover, Boeing “hadn’t indicated any impact on 2016 [737NG] deliveries from Max prior to this”, Strauss writes.
Indeed, Boeing executives had previously touted a plan to dedicate a new, third assembly line exclusively to the 737 Max ramp-up, thereby minimizing the impact on the two existing lines for the 737NG.
To support an alternative theory, Strauss cites data from the Flightglobal Fleets Analyzer database.
“Examining the most recent Ascend data would indicate unfilled NG slots during the bridge period,” he writes.
Fleets Analyzer’s dataset suggests Boeing will deliver 493 737NGs in 2016, or 11 fewer than a production rate of 42 per month on a mature assembly line would Boeing still has slightly fewer than 1,300 737NGs currently in backlog, according to the Analyzer. That represents more two years output at current and planned production rates on the 737 lines. But that doesn’t mean there are enough customers within the backlog ready to take all 504 aircraft that Boeing expects to build this year
“We believe lower 737NG deliveries could be attributable to a gap in the bridge to Max and therefore BA is diverting available capacity from the NG to the Max earlier than expected,” Strauss writes.
Another possible explanation for the planned 737 delivery reduction in 2016 could be seen as a positive development in 2017.
Boeing still plans to deliver the first 737 Max in the third quarter of 2017, but that gives the company an unusually large, 18-month window between first flight first delivery of a major derivative. By contrast, Boeing delivered the first 787-9 within 10 months of the type’s first flight in September 2013.
Strauss also points out that Airbus needed 14 months between first flight and delivery of the A320neo, which included a nearly one-month delay.
“Another possibility is that Max could potentially begin to deliver sooner than expected and [Boeing] is producing airplanes earlier as a result.”
Source: Cirium Dashboard
