Boeing signaled it’s at risk of losing more than a third of its 777X order haul because the latest delay to the behemoth jet’s debut – now slated for late 2023 – gives some customers the right to walk away from sales contracts.
The U.S. planemaker lowered the backlog for the 777X family to just 191 jets in a regulatory filing on Monday, or 38% fewer than the firm orders listed on the company’s website.
The reason for the drop is an accounting standard that requires sales at risk of falling through to be removed, the company said in an email.
The falling tally underscores the precarious future of Boeing’s newest jetliner, which is heir to the 747 jumbo as the largest passenger plane in the company’s product lineup.
The coronavirus pandemic has crushed demand for twin-aisle aircraft built to cruise across oceans, and orders for wide-body jets such as the 777X, Boeing’s 787 Dreamliner and competing Airbus models are expected to be the last to recover from the slump.
Boeing announced a US$6.5 billion charge for the 777X when it reported fourth-quarter earnings last week and said the latest delay would leave the plane’s debut three years behind its original schedule.
Cancellations, production cuts and flight-testing risks could bring additional losses, the company warned in its annual financial filing with the U.S. Securities and Exchange Commission.
Emirates, one of the 777X’s initial customers, has signaled that it intends to swap another chunk of its 115 orders for Dreamliners, which are smaller.
The Dubai-based carrier may have more leverage to do so if its contracts have provisions – standard in the industry – that allow customers to bolt if an airplane’s delivery is more than a year late.
Such contract terms wiped out more than 1,100 planes from Boeing’s backlog of 737 Max jets amid a lengthy grounding after two fatal accidents.
Delays for the 777X “have resulted in, and may continue to result in, customers having the right to terminate orders and or substitute orders for other Boeing aircraft,” the filing said.
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