Boeing May Miss 737 MAX Production Targets for 2024, Analysts Warn

Boeing is at risk of falling short of its year-end production targets for the 737 MAX jets in 2024, according to insights from Moody’s and S&P analysts as reported by Reuters. The aerospace leader had aimed to increase its manufacturing rate from 25 to 38 MAX jets per month by the end of 2024. However, industry experts suggest that achieving this goal may be more feasible in 2025 due to various operational challenges.

Analysts have pinpointed potential labor disruptions at Boeing’s Seattle-area facilities as a significant risk to the production timeline. Despite these concerns, the company’s credit rating remains stable, with no immediate threat of a downgrade to junk status, both rating agencies confirmed on Friday.

Jonathan Root from Moody’s projected that Boeing might manage to produce 32 MAX jets per month by the end of 2024, reaching the target of 38 jets only in the latter half of 2025. “We remain in a ‘show me’ state of mind,” Root commented, indicating a cautious approach to the company’s promises.

This production uncertainty follows a January incident involving a mid-air panel blowout on a new 737 MAX 9, highlighting ongoing quality-control issues. As a result, Boeing has slowed production to focus on enhancing quality, but this has adversely impacted its cash flow. The company reported approximately $8.3 billion in cash burn for the first half of 2024 and anticipates negative free cash flow for the entire year.

Ben Tsocanos of S&P Global Ratings expressed skepticism about Boeing’s ability to meet its production goals, citing historical underperformance and upcoming labor negotiations. “Increasing and stabilizing MAX production is necessary to generating free cash flow, which is ultimately what we care about to maintain the rating,” Tsocanos stated.

Boeing’s finance chief recently reiterated the company’s commitment to ramping up output to meet the 38 planes per month target by year-end. However, the new CEO Kelly Ortberg has not yet publicly addressed these production plans. Analysts at William Blair speculate that Ortberg may lower the production targets to ensure a focus on quality.

Spirit AeroSystems, soon to be acquired by Boeing, plays a crucial role in the increased production, especially as the primary supplier of the 737 fuselage. Despite producing 31 fuselages per month, Spirit shipped only 27 to Boeing in the last quarter due to extended inspections initiated by Boeing at Spirit’s Kansas facility.

The ongoing uncertainty around Boeing’s aircraft deliveries has prompted caution among airlines regarding their future scheduling. Allegiant Air, which switched from Airbus to Boeing with an order of 50 737 MAX planes in 2022, has experienced delays in its expected deliveries, further underscoring the broader implications of Boeing’s production challenges.