For Boeing, Delivering Will Be Tough

Boeing’s

BA -2.71%

big problem isn’t selling the infamous 737 MAX. It is delivering it.

On Wednesday, the Chicago-based plane maker’s shares fell almost 3% in morning trading after it reported a $561 million loss for the first quarter. While the defense business performed better than analysts anticipated, commercial-aircraft revenue once again came in well below expectations.

There are pockets of good news: Domestic travel in the U.S. staged a sudden recovery in March that is starting to percolate through the aviation industry. Boeing recorded 76 orders net of cancellations for the quarter, well ahead of its European rival

Airbus,

which had 61 more cancellations than orders. Boeing’s tally included a high-profile deal for 100 737 MAX jets with

Southwest Airlines

that helps restore confidence in the beleaguered plane.

But the overall picture is dragged down by the U.S. plane maker’s hardships in shifting much of its massive stockpile of planes.

To meet investors’ expectations for 2021, Boeing needs to unload hundreds of undelivered jets that have accumulated on parking lots over the past two years as a result of the MAX crisis and recent problems with the 787 Dreamliner. Production costs for these planes have already been recorded, so every delivery is a big financial windfall.

Yet Boeing’s inventories rose to $83 billion by March 31—below the $87 billion peak in 2020, but still an increase from December. That is despite the fact that it delivered 77 passenger planes. A pause in 787 deliveries until March is one reason for the increase, but it could also be a worrisome sign that Boeing is struggling to deliver the MAX jets it builds while also running down its stockpiles. “I’ll be concerned if it’s a trend,” said Credit Suisse analyst

Robert Spingarn.

This month, 106 MAX planes were removed from service at Boeing’s behest after it identified new electrical faults. The problem appears to be unrelated to those that grounded the aircraft in 2019, but adds another delay to the company’s delivery plans. And there are other risks: The company drew a lot of attention to U.S.-China relations Wednesday, given that Beijing still hasn’t recertified the MAX.

The plane maker reiterated Wednesday that it wants to deliver most of its 100 or so idle 787s and about half of its 400 MAX jets by year-end, but this is looking increasingly difficult.

Boeing’s stock has only been marginally dented by the recent string of missteps and has performed almost as well as Airbus’s since the onset of the pandemic. It rallied hard in March, perhaps because the market was feeling optimistic about the U.S. vaccination campaign.

But U.S. airlines only make up 18% of its backlog of commercial-jet orders, Bernstein Research data shows—a similar position to that at Airbus. And the outlook for travel demand outside the U.S. is deteriorating, according to the April forecast by the International Air Transport Association. This saps the appetite of overseas airlines to take on planes, particularly if delivery delays allow them to cancel purchase commitments.

The whole aerospace industry will benefit from the end of the pandemic, and Boeing retains significant long-term value. To play the U.S. recovery story, however, investors have better options.

After years of cost overruns, errors and delays, Boeing’s space program is facing a major test: Later this year it will likely make its second attempt to launch its Starliner crew capsule to the International Space Station. WSJ looks at the company’s path to this crucial moment and what’s riding on the test flight’s success. Illustration: Alex Kuzoian/WSJ

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