The devastating airline downturn triggered by the coronavirus pandemic effectively paralyzed Boeing’s passenger jet business in May. For the month, Boeing delivered a paltry four airplanes, not one of those a passenger jet, and only took in new orders for a net gain of five freighter jets.
But order cancellations for passenger jets — especially the still-grounded 737 MAX — far exceeded those numbers, according to order data Boeing released Tuesday.
Customers outright canceled 14 MAXs, while Boeing had to remove from its official backlog a further 80 MAX orders that are no longer deemed solid enough to meet U.S. accounting standards.
Some of those 80 officially dubious orders come from airlines that may want to void their contracts and can do so due to the delay in delivering the planes. Others are from customers under such severe financial stress with the collapse of air travel that they are no longer creditworthy.
Some of the formal MAX cancellations came from major airplane lessors. GECAS, the airplane leasing unit of GE, canceled four; Aviation Capital Group canceled three; and Avolon canceled one. Boeing declined to identify the customers for the remaining six formal cancellations.
The COVID-19 outbreak caused Boeing to shut its factories for a month in March, and then in late May management announced sharp reductions in airplane production. But slow as Boeing’s output is, it’s still more than the airlines are ready or able to take right now.
At the Renton plant, where Boeing is still prohibited from delivering any MAXs, in May it delivered just one 737-based P-8 anti-submarine military plane.
And from the Everett widebody jet plant, it delivered one 767 freighter airplane to UPS and two 777 freighters to China Southern. Those orders suggest air freight operators are bullish about demand for cargo jets even beyond the current surge, which is driven in large part by the absence of the typical cargo space available in the bellies of all the grounded passenger aircraft.
Notably, not a single 787 Dreamliner was delivered either from Everett or from Boeing’s plant in South Carolina, even though the slowed production is still nominally supposed to be 10 of these jets per month.
Worldwide travel restrictions and other logistical challenges must have prevented some customers from getting here to take their airplanes, while others deferred delivery due to lack of business.
As the coronavirus crisis hits production, layoffs have begun and nearly 10,000 local Boeing employees will leave the company this month and next.
On the order side, Boeing’s nasty spat with Russian cargo carrier Volga-Dneper, currently playing out in a Seattle court, showed up in the May data: Boeing canceled one 747-8 freighter and two 777 freighters for Volga and sold them to other customers.
UPS took the 747-8 jumbo jet order that was previously ordered by Volga and is set for delivery soon. However, it also canceled one of its previous orders for the same plane that was scheduled for later delivery, so the net impact is still one order lost to the 747 order book.
The customer that took over Volga’s order for two 777 freighters was not identified. This replacement order is particularly significant because, according to the court filings, Boeing’s contract with the new airline includes discounts for additional 777X and 787 orders by the end of June.
Boeing removed all three former Volga orders from its “dubious orders” category and returned them as new customer orders to the firm backlog count.
In other positive freighter sales news, Boeing took orders for six 767 freighters in May, one from FedEx and five from an unidentified customer. This is likely UPS, the only other customer currently taking 767s.
The bottom line after all the additions and cancellations in May is that Boeing’s net order tally for the year now stands at negative -602, consisting of 58 new orders, 322 jets formally cancelled and 338 jets taken out as no longer firm enough.
Boeing’s total order backlog is reduced to 4,744 airplanes. And the jetmaker has so far delivered just 60 airplanes this year.
In comparison, Airbus in May delivered 24 jets, bringing its total for the year to 160.
The Airbus advantage in deliveries is largely due to Boeing’s 737 MAX being grounded, as the European planemaker delivered 18 of the rival A320 jet family. Airbus also delivered two A220-300s and four A350 widebody jets.
Airbus won no new orders in May, but also suffered no cancellations.
The Airbus backlog now stands at 7,621 airplanes.
Though that backlog is likely to shrink very dramatically as the effect of airline cutbacks works through the system this year, the order gap between Airbus and Boeing is now remarkably wide.