Boeing Faces Turbulence as 777X Delay Could Trigger Billions in Charges

Boeing (NYSE:BA) is bracing for a potential financial hit due to further delays in the commercial debut of its 777X aircraft, now slated for early 2027 instead of 2026. This setback could result in the planemaker absorbing accounting charges ranging from $1 billion to $4 billion, adding pressure to its already strained financial performance.

Boeing's stock is currently trading 0.087% lower in the pre-market from yesterday's $217.43 close. This seemingly minor shift belies the underlying concerns surrounding the 777X program, which has faced persistent delays and mounting costs. The program's troubles are reflected in the company's year-to-date performance, which has seen considerable fluctuation amidst production challenges and regulatory scrutiny.

The primary driver for these potential charges is the extended timeline for the 777X's entry into service. Deutsche Lufthansa, the launch customer, has already adjusted its fleet plans, excluding the aircraft until 2027. Emirates, the largest customer, has also adopted a more cautious stance. Such customer adjustments underscore the gravity of the delay and its impact on Boeing's revenue projections.

Analysts anticipate that Boeing will likely record a financial charge related to the 777X delay in its upcoming third-quarter earnings report. This would be in addition to the more than $10 billion in charges the company has already incurred on the program, further impacting profitability. Investment analysts have also downgraded their free cash flow projections for 2026, anticipating deliveries to commence in the second half of 2027, a significant pushback from earlier estimates.

Adding to the complexity, Boeing CEO Kelly Ortberg has acknowledged that the company is behind schedule in certifying the 777-9, a key variant in the 777X series. While no new technical issues have surfaced, substantial certification work remains, and delays, even minor ones, carry significant financial ramifications. Emirates' chairman, Sheikh Ahmed bin Saeed Al Maktoum, has voiced dissatisfaction with Boeing over the delays, which have postponed the jet's service entry by approximately five years, forcing the airline to extend the service life of its existing fleet.

Earlier this year, Boeing removed orders for 38 of its in-development 777X aircraft from its backlog, signaling internal reservations about the market's demand for the long-delayed jet. This move also reflects the broader economic and operational challenges confronting the aviation sector. Boeing has also warned of a substantial fourth-quarter loss for 2024, nearly three times larger than Wall Street's projections, due to production quality issues, increased regulatory oversight, supply chain disruptions, and labor actions.

Despite these challenges, there have been some positive developments. Cathay Pacific Airways recently announced an order for 14 additional Boeing 777-9 aircraft, potentially bringing its total to 42. Despite the aircraft model not yet being certified by the U.S. Federal Aviation Administration, Boeing anticipates deliveries beginning next year, with Cathay expecting its first delivery in early 2027.

The ongoing delays and related financial implications of the 777X program continue to cast a shadow over Boeing's near-term performance, with the stock down 6.43% in the past month. Despite the near term pullback, Boeing's stock continues to trade26.51% higher on a YTD basis.