May 25th was a good day for Boeing: the company confirmed that it has resumed deliveries of its 737 MAX, after making the modifications required due to a production defect in its fuselage.
Boeing halts deliveries of some 737 MAXs after supplier part issues
The resumption of deliveries brings Boeing closer to the goal of achieving 400 to 450 jet deliveries this year. This target is under the scrutiny of investors, as the company aims to recover from consecutive crises triggered by two fatal accidents and the pandemic.
“The first half of the year is projected to average 30 deliveries per month and the second half around 40 per month,” stated CFO Brian West at a conference organized by Wolfe Research, in reference to future deliveries.
Boeing was forced to pause deliveries of the 737 MAX earlier this year due to the improper installation of components that connect the vertical tail to the fuselage, manufactured by Spirit AeroSystems.
As reported by Reuters, several analysts anticipated that this pause could hinder Boeing’s plans to speed up the production of the 737 MAX to 38 per month from the current 31.
Despite these predictions, West reaffirmed that the company plans to reach this target within the year. “The exact timeline is still unclear, but it is within our strategy,” he added.
Negotiating prices (finally) with some leverage
In terms of prices, West said that the current environment is “favorable” and that Boeing will exercise “discipline” when setting aircraft value.
The order backlog of Boeing and Airbus is large and continues to grow, as airlines rush to buy planes to take advantage of the post-pandemic travel rebound.
As expected, the demand for new units benefits the manufacturer, which will be able to impose conditions on airlines and lessors… as long as it can increase the pace of deliveries.
Ryanair indicated that it paid a higher cost per seat than in previous agreements when it announced an order for up to 300 Boeing jets. Of course, Ryanair usually chooses moments of greatest weakness of its suppliers to negotiate contracts. But this time, the ace in the hole was in Renton.
“We continue to secure future sales,” West commented, although he knows he depends on his supply chain to maintain the advantage in negotiation. He had no choice but to admit that some aspects of the supply chain are not up to par, in what has become a persistent problem and an area of continuous surveillance.
