Boeing has delivered the first 737 Max to the jetliner’s largest customer, Lion Mentari Airlines, a step toward reaping a cash bounty from the best-selling aircraft in company history.
The hand-over to Lion’s Malaysia affiliate, Malindo Airways, was only a day late after the US plane maker quickly recovered from a possible engine manufacturing defect, which had grounded the fledgling Max fleet last week. Before that hiccup, the upgraded 737 had coasted through development and flight-testing months ahead of schedule – a rarity in an industry where delays are the norm.
The 737 and Airbus’ A320 family are the sturdy workhorses for budget carriers worldwide, built to withstand multiple short flights a day. And thanks to manufacturing scale and processes honed over decades, they are the biggest profit generators for the plane makers, one reason why investors have closely watched the progress of the latest Boeing single-aisle jet so closely.
The Max “is the most important programme at Boeing both now and in the future”, said George Ferguson, a senior air transport analyst with Bloomberg Intelligence. “It is the cash generator and they can’t screw it up.”
Boeing is counting on smooth sailing for the 737 Max, the newest member of the jet family dating back about 50 years. That is essential if the Chicago-based company is to make good on the cash it has promised to return to investors as production slows for the 777, the second-largest source of profit, ahead of a transition to a new model.
The Max family had netted 3,714 orders through the end of April, with the bulk of sales coming from the midsize Max-8. That jet, the first to debut, promises 8 per cent lower operating costs than Airbus’s A320neo jets from upgrades that include new fuel-efficient engines and winglets.
To convert that order backlog to cash, Boeing is in the process of speeding output at the Washington factory where the jets are manufactured by 12 per cent this year to a 47-jet monthly pace. Additional step-ups are planned for 2018 and 2019.
If all goes to plan, current-generation 737 planes and the Max will generate about US$25 billion in revenue this year, about 27 per cent of the company total, according to Mr Ferguson. He estimates Boeing will reap about $4bn in operating profit from the single-aisle jets in 2017, 43 per cent of its total.
The manufacturer plans to roll out three other models in addition to the Max 8 headed to Malindo. And the company’s salesforce is working to find customers for a possible stretched model, the Max 10, ahead of a possible debut in Paris next month.
* Bloomberg
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