Last month, Boeing orders sank to negative for the year and jet deliveries remained very low as the impact of the new coronavirus on the airline industry added to the company’s already massive damage from the grounding of the 737 MAX.
As of the end of February, Boeing’s commercial jet order tally for the year stands at -25 airplanes.
In a letter to employees Wednesday morning, Boeing CEO Dave Calhoun wrote of the impact of the “global economic disruption generated by the COVID-19 coronavirus.”
He announced that Boeing is cutting all noncritical spending, instituting a hiring freeze and “limiting overtime to critical 737 MAX return-to-service support and other key efforts in support of our customers.”
“We’re also taking steps to address the pressures on our business that result from the pain our customers and suppliers are feeling,” he wrote.
Boeing shares fell 18.1% Wednesday, more than three times the drop in the S&P 500.
The net order tally was the result of winning 11 new orders, converting orders for 19 MAXs to orders for seven 787 Dreamliners instead, cancellations of a further 27 orders, and finally an adjustment based on an accounting rule that allowed three previous less-solid commitments to now be counted as orders.
On the production side, Boeing delivered just 17 airplanes.
That list consisted of one 737-based P-8 military reconnaissance jet to the Navy, three 767 freighters to FedEx and UPS, one 777 freighter to DHL and a dozen 787 Dreamliners.
In January, Boeing had won a net zero new jet orders and delivered just 13 airplanes.
In comparison, through the end of last month competitor Airbus won net orders for 274 commercial jets and delivered 55 airplanes for the year.
However, Airbus is also facing an order slowdown. All those orders came in January, with zero new orders in February.
The order and delivery statistics at Boeing first of all reflect the impact of the 737 MAX grounding. None are being delivered and no airline is ordering any, due to the uncertainty around the airplane and when it will be available.
Instead, some customers are converting MAX orders into orders for other jets, specifically 787s.
Los Angeles-based lessor Air Lease Corp. (ALC) last month converted orders for nine of its pending MAXs to an order for three 787s. ALC had done a similar deal last year, switching out 15 MAXs for five 787s.
Similarly, Gulf carrier Oman Air last month converted orders for 10 of its pending MAXs to an order for four 787s.
Boeing is happy to make such swaps because firstly, it needs more 787 widebody orders, and secondly, the anticipated ramp-up of the 737 MAX after it is cleared to fly will be slow. So it’s willing to lose some of those delivery slots and give them to other airline customers that want the planes sooner.
Unfortunately, in the past couple of weeks prospects for any airline wanting planes quickly have darkened.
The steps cited by Calhoun must include giving key airlines a break on deliveries if they are in a cash crunch. For Chinese carriers right now, it may be impossible to travel to Seattle to take delivery of jets, even if they want them — and right now, they probably don’t.
This is at least partly why, in addition to delivering no MAXs, last month Boeing delivered only one 777 when the rate is supposed to be three jets per month.
And the likely coronavirus impact is perhaps most noticeable in 787 deliveries. The production rate for the 787 is supposed to be 14 per month, but in January Boeing delivered only six, and last month only 12.
Calhoun told employees: “The year ahead is shaping up to be as challenging for our business as any in the recent past.”
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