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Boeing 777X Delays Cause 118 Orders to No Longer Show as Firm

After Boeing delayed the launch year of their 777X to 2023, the Chicago-based aerospace giant announced the potential loss of over 100 orders. The company is also anticipating a $6.5 billion charge related to the project, after the COVID-19 pandemic reduced demand for the next-generation widebody jet.

Anticipating even more scrutiny after the 737 MAX problems, The Boeing Company says a delay in their 777X project may cause the loss of 118 orders. Due to accounting rules within the aerospace giant, the orders are no longer seen as firm, which could create even more problems for the company.

Additional Scrutiny and Reduced Demand Results in $6.5 Billion Reach-Forward Loss on Project

The concerns about the 777X were noted in the Chicago-based company’s annual report, submitted to the U.S. Securities and Exchange Commission on Monday, Feb. 1, 2021. One of the key concerns about the program revolves around the certification of the next-generation airframe. After the 20-month grounding of the MAX and discovery of cut corners by the airline, Boeing now anticipates their new aircraft could take more time to get certified by the Federal Aviation Administration and other international civil aviation groups.

“On development programs such as the 777X, we are subject to risks with respect to the timing and conditions of aircraft certification,” the company wrote in their annual report. “Including potential gaps between when aircraft are certified in various jurisdictions, and our estimates with respect to timing of future certifications could have an impact on overall program status. Any such change in estimates relating to program accounting may adversely affect future financial performance.”

Complicating things even further is the COVID-19 pandemic. Because of a weaker international aviation market and reduced demand for new aircraft, Boeing is pushing back their first delivery of the 777X for several years.

“We now anticipate that the first 777X delivery will occur in late 2023,” the company writes. “We will closely monitor the key factors that affect backlog and future demand including customers’ evolving fleet plans, the wide-body replacement cycle and the cargo market. We will maintain a disciplined rate management process, and make adjustments as appropriate in the future.”

As a result, 118 orders are no longer considered “firm” by the company. Instead, Boeing notes that customers reserve the right to either terminate orders outright, or substitute the orders for other Boeing airframes.

The perfect storm of the novel Coronavirus outbreak and longer approval time is causing Boeing to take a $6.5 billion reach-forward loss on the project. Although the loss is primarily due to the 777X project, other factors, including abnormal production costs, the 737 MAX grounding and production issues with the 787 Dreamliner, all play into the loss.

Losses Second Major Setback for Boeing This Year

The additional losses and loss of firm orders marks the second major setback for the commercial aircraft manufacturer. Earlier in 2021, the company entered into a deferred prosecution agreement with the U.S. Justice Department, resulting in a financial penalty in excess of $2 billion.

Feature image courtesy: Dan Nevill/Flickr/CC-BY-2.0

edgewood49 February 3, 2021

Joe, I am sorry but issues with the 777X were there long before the Covid outbreak BA has only themselves to blame for where they are today in the world of aircraft manufacturing let alone losing they're "moral compass". I think the 777X has the potential to be hugely successful for long haul flying, if BA can get their act together however signs of that are slim to none.