The Boeing 777X Continues To Frustrate

TOPSHOT – A Boeing 777X airplane takes off on its inaugural flight at Paine Field in Everett, Washington on January 25, 2020. (Photo by Jason Redmond / AFP) (Photo by JASON REDMOND/AFP via Getty Images)

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In November 2013 at the Dubai Air Show, Boeing announced a successor design to the highly successful B777 widebody aircraft that had become the workhorse of international travel. The Boeing 777X would employ improved General Electric engines and composite wings that would be so long that they would be required to fold at their tips to fit into existing airport gate infrastructure.

The expected delivery date for the “triple seven X” was set for December 2019. Earlier this month, while speaking at the Morgan Stanley Laguna Conference, Boeing CEO Kelly Ortberg warned that certification issues were creating “a mountain of work.” While no new certification issues were mentioned, he stated “We’re clearly behind our plan in getting the certification done.”

This was counter to the existing sentiment in the industry that Boeing was making good progress on delivering the aircraft in the coming year, 2026. A fifth test aircraft had just been added to the fleet and had made its maiden flight in August. The test aircraft are used to complete the requirements for the Federal Aviation Administration’s Type Inspection Authorization (TIA). Boeing had successfully completed two of the most recent steps in the process in July and August successively, fueling optimism that the long delayed aircraft would finally reach the tarmacs of the world’s leading international airlines.

The reaction from the customer community was immediate. Sir Timothy Clark, the President of Emirates, the Dubai based airline, said he planned a “serious conversation” with Boeing and added “I fail to see how Boeing can make any meaningful forecasts of delivery dates.” Emirates has contracted for over 200 777X’s, making up over one third of the order book.

Long haul aircraft are essential to many mid-East carriers’ strategy of connecting continents through their portals astride Asia, Africa and Europe, and with onward legs that can reach the Americas. Another mid- East carrier, Qatar Airways, makes up almost a quarter of the order book and announced purchase of 30 of the 777-8 and 777-9 variants during the US Presidential visit in May of this year, as part of an historic order totaling more than $96 Billion in value.

Although not explicitly stated, the revelation of further delay has been interpreted to mean that first delivery will likely slip into 2027. This has major implications, not only for the airlines’ ability to refresh and expand their long-haul fleets, but also to Boeing’s ongoing financial recovery.

Jeffries estimated that the slip in deliveries could result in a $4 Billion non-cash charge and negatively impact free cash flow by $2 Billion. On the day of the announcement, Boeing shares dropped over 3%.

Despite the fallout from the announcement, many in the industry have become accustomed to cascading delays in delivering an aircraft. The Boeing 787 was three and a half years late and cost Boeing over $30 Billion to develop. However, the 787 was an all new aircraft, unlike the 777X derivative. Jeffries estimates that, to date, Boeing has accumulated $10 Billion in charges against the program. This included the creation of an all new facility to produce the wing in Everett, Washington.

The solace, if any, is that the challenges at this point appear to be bureaucratic, not technical. Ortberg is trying to change a culture that was notoriously complacent regarding schedule and had allowed safety to become compromised by focus on the bottom line.

With this move, he is trying to increase transparency to the customer and supplier base while ensuring that the aircraft, when eventually delivered, will not only perform to airlines’ expectations, but will surpass safety and reliability requirements.

By all accounts, the 777X should be a winning addition to the Boeing fleet and is essential to the company’s financial recovery. Ortberg’s candor on the state of the program was commendable, however the industry’s tolerance for continued delay (and silence) is beyond acceptance.