United States aircraft manufacturer Boeing released its 2020 fourth-quarter results yesterday. In the process, Boeing confirmed what most of us knew. 2020 was a shocker of a year for Boeing. They delivered 59 aircraft in the fourth quarter and just 157 aircraft across the entire year. That is the lowest number of planes Boeing has delivered since 1977.
2020 a lousy year for aircraft sales at Boeing
In 1977, Boeing delivered 156 planes. 1977 marked the dying days of the Civil Aeronautics Board and airline regulation in the United States. Airline industry regulation was strangling airline growth in the United States, then the world’s biggest airline market. Following deregulation in 1978, aircraft sales took off. Boeing’s output was also pushed along by many other fast-growing airline markets around the world.
Since 1977, Boeing has delivered 18,994 aircraft, averaging 442 per year. However, annual aircraft output does vary considerably. That’s determined by a whole host of factors, many beyond Boeing’s control. But in the last five years, Boeing had some of its best years ever. In 2018, Boeing delivered a record 806 planes. In 2018, Boeing enjoyed record revenue of $28.3 billion and a record operating profit of $4.2 billion on the back of those bumper sales.
Jump forward two years, and the situation isn’t as rosy. Across 2020, Boeing delivered forty-three 737 aircraft, five 747 aircraft, thirty 767 aircraft, twenty-six 777 aircraft, and 53 Dreamliners. In addition to commercial aircraft deliveries, Boeing also delivered 154 planes and helicopters under its defense, space, and security programs in 2020.
Factors driving the sales decline
Several factors drove Boeing’s dismal performance in 2020. Some of them, such as the global downturn in travel demand, were beyond Boeing’s control. Airline industry analysis group Cirium predicts demand for over 43,000 aircraft over the next two decades. That may sound impressive, but it is well down on previous forecasts. Cirium argues the dynamics of aircraft manufacturing are fundamentally altered. Cirium says;
“It is clear that, for the foreseeable future, there will remain substantially more supply of aircraft than there is demand.”
Assuming demand recovers as predicted, Cirium thinks deliveries will not reach 2018 levels until 2025. While it sounds dire, it’s not all bad news for Boeing. One of the big drags on sales in both 2019 and 2020 was the 737 MAX debacle. Following two fatal crashes, the aircraft was grounded in March 2019 and only recently cleared to fly again in the United States. Since then, there have been a couple of morale and bottom-line boosting 737 MAX orders at Boeing. That included an order for 75 MAXs by Ryanair and an additional 23 MAXs for Alaska Airlines.
“The resumption of 737 MAX deliveries in December was a key milestone,” said Boeing’s CFO Greg Smith earlier today.
Boeing addressing in-house issues and aligning supply with demand
Boeing is also moving to get on top of production problems and delivery delays for its 787 Dreamliner program. The aircraft manufacturer has limited Dreamliner deliveries while conducting comprehensive inspections of its planes before they roll out of the factory. Referring to the delays, Greg Smith said;
“We’re confident that we’re taking the right steps for our customers and for the long term health of the 787 program.”
Boeing says it will continue to align supply to meet the demand for new planes. While the aircraft manufacturer didn’t say how many planes they expect to deliver in 2021, you can safely say it will fall well short of the 2018 peak. But unless there is further trouble ahead, the 2020 delivery figures should also be a low-water mark at Boeing.
Boeing will release its fourth-quarter financial statements later this month. That will reveal Boeing’s financial performance over the past 12 months. It is another set of figures many people will be keenly watching.
