Boeing orders lessen sting of weak commercial deliveries in 2020: Moody's

New York [US], January 18 : After the US aerospace major Boeing recently announced it delivered 157 commercial aircraft for 2020, down from 380 in 2019 and 806 in 2018, Moody's Investors Service has said the recent orders mitigate the sting of lower deliveries in 2020.
So far this year through January 13, Boeing announced orders for four 747-8F freighters and eight 777F freighters for which Moody's estimated an aggregate value of about USD 1.7 billion.
The US Air Force also recently placed an order for 12 KC-46A Tankers with a contract value of USD 1.7 billion and NASA placed an order for six solar arrays for the International Space Station but did not disclose the value.
"Our estimate of the value of freighter orders reflects our assumptions of selling prices including discounts to current market values for new deliveries of these models according to various aircraft appraisers' valuation guides," said Moody's in its credit outlook released on Monday.
"Achieving its delivery projection of about 435 aircraft in 2021 will be a good start in the multi-year effort to restore franchise value and the balance sheet."
However, increased costs to rectify manufacturing defects on the 787, along with USD 743.6 million of payments due pursuant to the recent Deferred Prosecution Agreement with the Department of Justice, could prevent Boeing from achieving positive cash flow for all of 2021, relative to prior projection of modest positive free cash flow.
Boeing's commercial deliveries totalled 59 for the quarter, up from 28 in the third quarter. At 34, defence deliveries were about steady versus 37 in the third quarter.
The trifecta of the ongoing grounding of the company's 737 MAX, the manufacturing defects identified on the tail section and horizontal stabiliser of the 787 wide-body in 2020 and the ravages of coronavirus on the company's airline customers made 2020 a dismal year for the company's commercial aircraft operations.
"However, we anticipate that the civil aviation authorities from Europe and Canada will restore the 737 MAX' flight status in coming weeks, which will facilitate increasing deliveries of this model as 2021 progresses," said Moody's.
Moody's assumed that Boeing will deliver about 280 737s in 2021, reducing the inventory of built not delivered MAXes to about 225 to 250 aircraft by the end of 2021, inclusive of 2021's production.
Deliveries of 787s should also increase as Boeing completes potential re-work related to the tail section shims and horizontal stabiliser assembly tolerances that will be required to allow the delivery from the inventory of produced not delivered 787s, and notwithstanding that monthly production of 787s is scheduled to decline to five per month by August 2021, from 10 per month in 2020 and six per month in the first half of 2021.
"We estimate the 787 inventory at about 70 aircraft at the end of 2020 and about 85 to 100 deliveries in 2021. This number of deliveries and planned production implies that Boeing will close out 2021 with built not delivered 787s in inventory, possibly as many as 60 if production does not further decline," said Moody's.