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  • Writer's pictureGary Crichlow

Return of the MAX: the Wait for its Big Break Continues

Updated: May 21

A regular update where our in house team of aviation experts and ISTAT certified appraisers use our data to analyse values, market movements and notable aviation news.

 

This week, our Head of Commercial Analysts, Gary Crichlow, shares AviationValues’ data insights on the Boeing 737 MAX.


Introduction

Last November we published an article based on our analysis of the 737 MAX’s historical production and deliveries as well as its backlog. The data led us to the following conclusions:


  • While Boeing had made substantial progress in clearing its MAX inventory, it still faced significant challenges in meeting its stated aim of substantially reducing it by the end of 2024. AviationValues took the view that the inventory would not be cleared before the end of 2026

  • The MAX 10 was the type most likely to be a major seller alongside the MAX 8

  • Top priority for Boeing would need to be getting the MAX 10 certificated and entered into service

 

Much has happened since last November, to say the least, and Boeing’s quality control is deservedly in the spotlight. With Boeing’s first quarter earnings for 2024 announced, we’ve taken a fresh look at our data. We’ve found that:


  • Despite speculation in the news, Boeing customers are by and large remaining loyal. The message appears to be that while there is frustration with delays in deliveries (and a price to be extracted), the requirement for a return to quality is paramount

  • With exports to China resuming, we are now estimating mid-2025 as the realistic date for the MAX 8 inventory to be cleared

  • Delays in certification and rumours of defections to the rival Airbus A321neo notwithstanding, the MAX 10 order book is holding steady: it still looks to become the second stalwart of the MAX family alongside the MAX 8, and it is where the opportunity is for Boeing 


737 Historical Production Rates

AviationValues tracks every commercial aircraft worldwide, from its first flight onwards. By looking at every Boeing 737’s first flight information (both Next Generation and MAX families), we can build a picture of 737 production over the past 10 years.

 

There are some limitations in terms of including aircraft that may have rolled off the assembly line but not actually flown. With that caveat, the overall picture of our analysis shows good alignment with production comments made by the manufacturer during investor presentations and earnings calls over that period.

Max 737 Production Rates 2014 - 2024

737 Max Boeing Investor Comments

737 MAX Inventory Trend Analysis

In total, we tally a total of nearly 1,700 737 MAX passenger aircraft that have achieved a first flight.

737 MAX Cumulative Production

By comparing monthly production (measured by the number of aircraft that first flew in each month) to monthly deliveries, we can build a picture of the number of aircraft remaining on ground, having rolled off the assembly line but not yet delivered. A strong caveat: this is not how Boeing defines aircraft in inventory. As a result, there is some discrepancy between our analysis and Boeing’s publicly stated figures which are given as approximations, and based primarily on MAX 8 aircraft produced before 2023.

 

Our analysis indicates that there are currently net 170 MAX commercial passenger aircraft (all models) that have recorded a first ADS-B flight signal but have not yet been delivered. This is down from a peak of 435 aircraft in late 2020.

 

For comparison, in its most recent financial report Boeing stated that it had approximately 110 MAX 8s that were produced prior to 2023, and approximately 35 MAX 7 / MAX 10 aircraft in its inventory as at 31 March 2024.

737 MAX Production & Delivery Rates

Looking Ahead: Focus on Liquidating the MAX Inventory

Boeing continues to target substantial liquidation of its 737 MAX 8 inventory (which it defines as aircraft produced prior to 2023) by the end of this year.

 

A key development is the resumption of deliveries to Chinese carriers, which Boeing stated account for 70 737 MAX 8 inventory aircraft as at 31 March 2024, down from 85 aircraft as at 31 December 2023. This represents an additional 5 aircraft out of inventory per month relative to the 5 aircraft per month average trend that we have observed between January 2022 and December 2023.  

 

Our line of reasoning for choosing the period between January 2022 and December 2023 as representative of a “typical” liquidation rate excluding China is that the MAX had been recertified in all the major global markets, with China being the last, only after December 2021. Although China had recertified existing Chinese operated MAXs to fly, it only lifted imports of new MAX deliveries in December 2023.  

 

We’ve applied the two scenarios of (a) the typical liquidation rate continuing, as well as (b) an increase in liquidation rate with additional deliveries into China to our count of the on ground MAX fleet.


Assuming this increased liquidation rate continues, our analysis of the on ground MAX fleet indicates that while the target is within reach, reaching Boeing’s stated goal would still be quite a feat. At current trends in inventory deliveries, we believe Boeing would have cleared its MAX 8 inventory, and be left with its inventory of yet-to-be-certified 737 MAX 7s and 10s, by mid-2025 rather than end of 2024.

737 MAX Inventory Liquidation Analysis

It’s important to keep in mind that over our projection period, Boeing may obtain the green light to increase production rates, with the expectation to deliver those new aircraft immediately. Managing a production ramp up project would be enough on its own for any manufacturer, let alone the hurdles Boeing would face to gain approval to do so, all the while maintaining progress in inventory reduction. It is a tall order, to say the least.

 

In summary, Boeing faces an uphill battle to meet its inventory reduction target. A large volume transaction (a price cut?) would go a long way, but barring that happening, options are limited.


Recovering Lost Ground: is the Window Closing?

The good news for Boeing is that its order book appears to be holding steady, with customers largely standing by the manufacturer. This does come at a price: customers have not hesitated to negotiate concessions.

 

Our view last November was that the MAX 8 and 10 would be the core variants of the MAX family, the MAX 9 would continue to be squeezed, and the MAX 7 would be a Southwest aircraft. Recent developments confirm this still to be the case.

 

In its most recent filings Boeing has declined to provide any estimates or targets for certification for either the MAX 7 or MAX 10, the last guidance being in Q3 2023 for both to enter into service in 2024. The Alaska Airlines accident, together with additional work requirement for the de-icing system, have clearly pushed certification further into the future.

 

There has been high profile speculation of MAX 10 customers turning away from the MAX 10 in favour of the rival Airbus A321neo as a result of the continued uncertainty. However, the data indicates that orders (including firm and options) for all MAX variants has grown since our analysis last November. Furthermore, while some customers have opted to pivot towards the linchpin MAX 8 model, new MAX 10 orders have also come in. Consequently, the overall split between variants has not markedly shifted, as the charts below illustrate.  

 

737 MAX Backlog Variant Breakdown
737 MAX Variants Backlog

Top 10 737 MAX Orders

737 MAX Orders

Some of the more high profile recent responses from these customers include:

737 MAX Order / Airline Comments

Conclusion

Clearly, Boeing is in the spotlight; deservedly so, as it clearly has significant challenges to resolve regarding the quality of the aircraft it delivers.

 

Equally clearly from the data, Boeing customers are by and large remaining loyal, albeit at a price. The message appears to be that while there is frustration with delays in deliveries, the requirement for a return to quality is paramount. The market’s acceptance of the MAX has been tested, but not broken – yet. Put simply, Boeing’s customers expect it to deliver.

 

Our analysis in November led us to believe a realistic timeframe for Boeing to liquidate its inventory would be the end of 2026, well beyond the manufacturer’s stated goal of year end 2024. Since then, China has opened up, increasing the likelihood of the target being met, and we are now estimating mid-2025 as the realistic date for the MAX 8 inventory to be cleared.

 

We reaffirm our view that the entry to service of the MAX 10 is where the opportunity is. Despite the uncertainty, the market certainly appears to be behind it, and the MAX 10 looks to set to be a mainstay of the MAX family alongside the MAX 8. As the largest and potentially most profitable MAX variant, it is crucial for Boeing to enter the high capacity single aisle market, long surrendered to its rival, as soon as it can.



Data as of March 2024


Disclaimer: The purpose of this blog is to provide general information and not to provide advice or guidance in relation to particular circumstances. Readers should not make decisions in reliance on any statement or opinion contained in this blog.


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