Boeing CEO: We have $600B of backlog

Key Concepts

• Boeing 777X: A new wide-body jetliner developed by Boeing.
• Entry into Service (EIS): The official date when an aircraft type begins commercial operations.
• Certification Process: The rigorous testing and approval process required by aviation authorities (like the FAA) before an aircraft can be flown commercially.
• Type Inspection Authorities (TIAs): The bodies responsible for inspecting and certifying aircraft types.
• FAA (Federal Aviation Administration): The U.S. agency responsible for regulating aviation safety.
• Government Shutdown: A situation where non-essential government functions are suspended due to a lack of appropriated funding.
• Backlog: The total value of orders for aircraft that Boeing has received but not yet delivered.
• Production Ramp-up: The process of increasing the rate at which aircraft are manufactured.

Boeing's 777X Certification Delay and Financial Impact

Boeing is experiencing a pre-market decline following the announcement of a wider-than-expected loss, despite revenue exceeding consensus. A significant factor contributing to this is a $4.9 billion charge related to the Boeing 777X program. This charge is attributed to the entry into service (EIS) for the 777X being officially pushed back to 2027.

Main Issues with the 777X Certification

• Performance: The aircraft itself is performing well, with no new issues reported concerning its engines or airframe. In fact, the 777X has accumulated more flight hours during testing than is typical, indicating a mature design.
• Certification Process Bottleneck: The primary challenge lies within the certification process. Boeing is facing delays in obtaining authorization from Type Inspection Authorities (TIAs) to conduct flights and receive certification credit.
• Schedule Slippage: The company fell behind schedule over the summer due to anticipated authorizations not materializing. This necessitated a reassessment of their go-forward plan, leading to the development of a "higher confidence plan" which, in turn, drove the significant charge.

Timeline and Flexibility

• Official EIS: 2027: The current projection for the 777X's entry into service is 2027.
• Potential for Earlier EIS: Boeing acknowledges the possibility of achieving certification and entry into service in 2026. If this occurs, it would be considered "gravy" or an upside to the current plan.
• Commitment to Schedule Improvement: Boeing is committed to doing everything possible to accelerate the schedule. However, they emphasize that the certification process is not entirely within their control.

Role of the FAA and Government Shutdown

• Collaboration with FAA: Boeing is actively working with the FAA, which also has a substantial workload.
• Government Shutdown Impact: While a government shutdown is currently underway, the certification office is back to work. Kelly Orberg stated that the shutdown did not drive the $4.9 billion charge. Any potential impact from the shutdown is expected to be minor, depending on its duration, and is not the root cause of the 777X delay. The delay is fundamentally due to Boeing's inability to progress through the certification process as quickly as anticipated.

Boeing's Order Book and Revenue Growth

Despite the challenges with the 777X, Boeing's overall order book is robust.

Key Figures and Growth

• Backlog Increase: The company's backlog has increased by 22% since the beginning of the year.
• Total Commercial Aircraft Backlog: Boeing currently holds orders for over 5,900 commercial airplanes.
• Backlog Value: The total backlog is valued at $600 billion.
• Order Generation: The current administration and the President are credited with playing a significant role in helping Boeing secure orders in the market, indicating strong demand for their products.

Focus on Delivery and Production

• Priority on Delivery: Boeing's primary focus is on delivering airplanes and ramping up production.
• Quality and Customer Feedback: The company is emphasizing the delivery of high-quality aircraft and is receiving positive feedback from customers.
• Production Milestone: By August of the current year, Boeing had already delivered more airplanes than they did in the entirety of the previous year.

Perspective on Order Acquisition

There's a perspective that countries with trade deficits with the U.S. might place large orders with Boeing as a way to address those deficits. While this might be a contributing factor, Boeing emphasizes that their focus is on the operational aspects of their business: delivering on their substantial backlog and increasing production rates. The delay in the 777X, while significant, is viewed by some as less impactful than the overall strength and size of their order book.

Conclusion

Boeing is facing a significant financial charge and a delayed entry into service for its 777X aircraft due to complexities in the certification process, not due to fundamental aircraft issues or the current government shutdown. However, the company maintains a strong order book and is prioritizing production ramp-up and delivery of high-quality aircraft, indicating underlying demand and operational progress in other areas.