Boeing has a 47 problem

Boeing has finally found a number investors care about almost as much as 747. It’s 47—the monthly 737 Max production rate the company is trying to reach while wing and engine shortages get in the way.

The planemaker currently builds roughly 42 Max jets per month, and it had hoped to stabilize production by reaching 47 this year. But CEO Kelly Ortberg said while reporting earnings Tuesday that the milestone is probably out of reach until early 2027, even as investors push Boeing to get more planes out the door.

That delay explains a mixed quarter for Boeing’s biggest business. The company’s commercial airplane division lost $697 million, nearly twice what analysts expected, as deliveries stagnated. Boeing handed over 161 commercial aircraft in the third quarter, down from 171 in the previous three months. Shares sunk more than 10% today.

Problems on the factory floor

Boeing doesn’t have a shortage of customers: Airlines are already waiting years for new aircraft. The problem is getting all the pieces of those aircraft to show up at the same time.

Delayed wing production has slowed the 737’s ramp-up, while engine deliveries are also lagging. Boeing is running into the same problem with the 787 Dreamliner, where it wants to go from building eight planes a month to 10, but still can’t count on enough engines arriving on schedule.

And adding five more planes a month is not like adding five more sandwiches to a lunch order. Boeing’s entire supply chain has to speed up together. Wings, engines, fuselages, seats, electronics, workers, and inspections all need to be ready at the right moment. If one piece is late, the plane can end up sitting around unfinished while work gets pushed further down the line. That means more fixing, more costs, and a greater chance something goes wrong.

Boeing has very good reasons not to test that last part. After years of safety and manufacturing problems, Ortberg is trying to make sure the production system is stable before pushing it harder. “Everybody wants us to go faster,” he said on an investor call—but Boeing will only ramp up once it can do so safely.

The real turnaround test

For Boeing, more finished planes mean more cash. Aircraft makers collect a large chunk of a jet’s purchase price when they hand it over to the customer—so every delayed delivery also delays money Boeing could use to repair a balance sheet carrying $45.9 billion of debt.

There was some good news, though. Boeing generated $464 million in free cash flow last quarter, beating analyst expectations of roughly $325 million and keeping its full-year target of $1 billion to $3 billion within reach.

Aerospace companies may be enjoying major demand from airlines and governments, but supply-chain shortages mean demand alone doesn’t guarantee earnings growth. For investors, Boeing’s report is a useful reminder that a massive backlog is only as valuable as a company’s ability to work through it.—HC