Boeing is fast approaching an awkward situation. If 737 MAX order cancellations continue at the current pace within a few weeks, the US airframer will have lost the equivalent of all production of the jet since civil aviation agencies banned its operation.
According to British consultancy Cirium, so far there have been 313 order cancellations for the 737 MAX. Since the jet was grounded in March 2019, Boeing is estimated to have completed production of around 400 aircraft.
The company decided to keep up the pace of production despite evidence that the aircraft’s recertification would take a long time. Because of this decision, Boeing reached the end of 2019 with yards and airports filled with planes ready to be delivered. The solution was to halt the assembly line in January, but four months later work was resumed.
Smaller order queue
This unusual scenario certainly has pros and cons. Cancellations are freeing up space in the delivery queue, which means that some customers may not have to wait long for their planes. On the other hand, it can result into a long period of slow production if more aircraft are canceled or have their delivery postponed.
In this scenario, Boeing would have a large inventory of aircraft to deliver, preventing the assembly line from resuming production at the pre-crisis pace. This means more unemployment in the production chain.
In addition to the 400 planes ready, there are about 380 737 MAX that were operating before grounding. It is not yet known how many customers will still maintain the plane even when it is released for service. If there is a rejection of the model, then the situation will be even more complicated for the manufacturer.
For now, Boeing still preserves a numerous list of orders to be delivered for the model. Until May, it had 3,776 units in its backlog, but only 37 of them were made after the ban on 737 MAX flights.
In the next report, the company is expected to reveal even smaller numbers since at least one new cancellation will be on the list, that of the leasing company BOC Aviation, which canceled 30 737 MAX aircraft last week.
Until it returns to flying, the 737 MAX should continue to “bleed” week by week. It remains to be seen whether after returning to the skies, Boeing will be able to stop this bleeding.