Geopolitics leads Boeing to downgrade dozens of jet orders

By Dominic Gates / The Seattle Times

SEATTLE — In the monthly update of its jet orders and delivery data released Tuesday, Boeing removed orders for 141 jets from the official backlog — most of which were planes formerly destined to be flown in Russia, where ultimate delivery is now in doubt because of international sanctions.

The data otherwise showed a steady flow of new airplane orders in March, including 35 net new orders for the 737 Max.

Deliveries of that Renton-built plane also saw an uptick in March with customers taking 34 of them.

However, widebody jet deliveries remain very slow with just three freighter planes and one Air Force tanker airframe delivered. Deliveries of the 787 Dreamliner, largely halted since fall 2020 while Boeing sorts out a fix to fuselage defects, remained at zero for the year.

Data released last week by Airbus shows that so far this year, the European manufacturer has delivered almost 50% more aircraft than Boeing, with 142 jets delivered compared with 95 by Boeing.

Unlike deliveries, a precise order comparison between the two rivals is not possible because Airbus does not remove doubtful orders from its books as Boeing does.

If those jets Boeing removed as dubious weren’t taken into account, allowing for a fairer comparison, its net orders for the first quarter of the year would be 145 airplanes compared with 83 for Airbus.

Russia sanctions bite

March’s big cut in Boeing’s order backlog was driven by U.S. accounting rules, which require the removal from the firm order book of any sale that becomes doubtful due to contract terms or the financial circumstances of the buyer.

For its March data, while Boeing did not specify which orders were removed, a spokesperson said the reassessment of credit quality for most of them was due to geopolitical events or international sanctions such as those imposed on Russia for its invasion of Ukraine.

The planes taken out of the backlog included a net total of 130 single-aisle 737 Maxs, eight 777F widebody freighters and three 787 Dreamliner twin-aisle jets.

Those certainly would have included 28 Maxs ordered by Russian flag carrier Aeroflot and six 777Fs ordered by cargo carrier Volga Dnepr.

Beyond those, most of the planes destined for Russia are ordered by international aircraft lessors, and it’s not possible to see that data broken out by country.

Airbus still has on its books 13 large twin-aisle A350s ordered by Aeroflot and 14 small single-aisle A220s ordered by Ilyushin Finance Co., a Russian lessor.

Additional jets on the European jetmaker’s books that are destined for Russian carriers were purchased by international lessors but also cannot be delivered until sanctions are lifted.

Orders come and go

Leaving aside the orders taken off the books largely for Russia, Boeing had 42 new gross orders in March, consisting of 36 for the Max and six for the 777F freighter from DHL.

That’s not counting 11 for an unidentified customer because that order is matched by 11 cancellations of the Max by an unidentified customer.

This looks essentially like an order swap, with a new customer taking over an existing order. It may even be just an airline switching from a direct buy to leasing the planes. The new owner would be the lessor, though the plane would be operated by the original airline buyer.

Boeing also had four separate order cancellations, including one Max and three 787-9 Dreamliners. So its net order tally for March, excluding the Russian removals, is 38 aircraft.

Airbus in comparison had 104 gross orders, all of them for the A320neo family of jets. However, it also canceled 76 orders, leaving its net order tally for March at 28 aircraft.

All but three of the Airbus cancellations were for AirAsia X, the financially troubled Malaysian long-haul airline, which finally canceled 63 widebody A330neos and 10 single-aisle A320neos.

This is exactly the sort of order that Boeing would likely have had to remove from its books when the airline was forced into a financial restructuring in 2020. Yet Airbus kept the orders on its books until the official cancellation last month.

Taking into account the orders taken out as dubious, Boeing booked 76 net orders in the first quarter.

Airbus, with its dubious orders still counted, booked 83 net orders in the first quarter.

Zero 787s delivered

In jet production and deliveries, Airbus remains far ahead of Boeing largely because the U.S. planemaker has been able to deliver only 14 of its 787 Dreamliners since October 2020 and none at all since May.

Airbus delivered 63 airplanes in March.

Those consisted of 54 single-aisle A320neos and A220s, as well as nine widebody passenger jets, three A330neos and six A350s.

Boeing delivered 41 airplanes in March.

That consisted of 37 single-aisle 737s built in Renton, of which 34 were Maxs, plus the four widebody jets built in Everett.

The widebodies were two 767 freighters for FedEx, one 777 freighter for China Airlines of Taiwan, and one 767 military airframe delivered to Boeing’s defense unit for modification to make it a KC-46 Air Force tanker.

The 787 blockage is because Boeing discovered fuselage defects consisting mainly of tiny gaps and unevenness at structural joins that are not considered a threat to flight safety but nevertheless must be fixed before delivery.

Multiple airplanes are being reworked in Everett and in North Charleston, South Carolina, and the Federal Aviation Administration has yet to approve Boeing’s fix.

Last week in Everett, a 787 that had been built in 2020 for American Airlines was rolled out of the factory again following the rework, with its carbon fiber composite fuselage covered in a sheath of black plastic to protect it from weather damage until it could be repainted.

The good news for Boeing is that March saw an uptick in the pace of 737 Max deliveries. It delivered 27 Maxs in January, 20 in February and 34 in March.

Airbus delivered 49 of the rival A320neo family of jets in March.

Boeing has now delivered a total of 353 Maxs since the plane returned to service from its prolonged grounding in late December 2020.

The uneven pace of deliveries masks the production rate inside the factory. Some of those delivered in March were previously built airplanes that were parked since the Max was grounded in 2019 and 2020 and have only now been reworked and returned to service.

Boeing has said its production target for early this year is to build and roll out 31 new Maxs per month. With additional planes coming from the parked inventory each month, the delivery rate should eventually be higher.