After two terrible years, 2021 brings some good news and new setbacks for Boeing

After two terrible years, 2021 brings some good news and new setbacks for Boeing

10 August 2021Reading time: 4 minutes

After two catastrophic years for Boeing, things seemed to go a little bit better for the American airplane manufacturer. The air traffic resumed in 2021 and airways and aircraft leasing companies were again willing to buy airplanes. Then due to technical issues on the 787 Dreamliner, Boeing decided to halt the delivery of this plane type…

Many problems over the past two years

The years 2019 and 2020 have been catastrophic for Boeing. In 2019 the entire 737 MAX fleet has been grounded for more than a year due to technical problems on the planes. The grounding was a direct consequence of the two deadly crashes involving 737 MAXs in October 2018 (Lion Air flight 610) and in March 2019 (Ethiopia Airline flight 302). These problems with the aircraft did not only lead to the grounding of the 737 MAX but also to many orders being canceled from potential clients.
The 737 MAX was supposed to be Boeing’s main asset to win the competition against its European competitor Airbus. As a result, the 737 MAX was Boeing’s most produced plane. During the grounding, the company had to store and maintain the planes already build leading to significant costs. Boeing also significantly lost ground against Airbus that year with only 54 planes order compared to 776 for its European competitor.
Then came the year 2020. Due to the global pandemic the entire airline industry was shut down and aircraft leasing companies and airlines massively canceled orders. Boeing was badly hit: more than 1000 orders were canceled. The company already in financial jeopardy due to the grounding of its 737 MAX had to reduce its workforce resulting in the layoff of thousands of Boeing’s employees.
With the resumption of air traffic end of 2020, the situation improved for Boeing and in the first half of 2021, it registered 219 new orders, ahead of Airbus with only 165 new orders for the same period. Bad news came mid-July when it was revealed that a new defect was found on the 787 Dreamliner. Boeing then announced that it will reduce the production of this airplane and halt the delivery of the airplane until further notice.

Earnings are increasing compared to 2020, but are still low

In the second quarter of 2021, Boeing generated a USD 17.00 billion revenue increasing by about 44% compared to the same quarter of 2020 (USD 11.8 billion). The company managed to generate USD 567 million of net earnings for this year’s second quarter compared to a USD 2.39 billion loss for Q2 2020. This is clearly a positive evolution for Boeing, but these figures have to be relativized. Compared to the USD 2.19 billion net earnings of Q2 2018 (before the grounding of the 737 MAX and the COVID crisis), the Q2 2021 net earnings remain low.        
For the first half of the year, Boeing is also doing better than last year: USD 32,21 billion revenue compared to USD 28.71 billion for the first half of 2020 (increasing by 12%). The net earnings also increased from USD -3.04 billion for the first half of 2020 to USD 6.00 million for the same period of 2021.
The release of the Q3 results in about three months will show if the new problems with the 787 Dreamliner had a significant impact on the company’s result or if Boeing was able to mitigate the consequence of this new setback.

Stock price development

Boeing’s stock reached its 52-weeks low on October 30th 2020 when the stock traded at USD 141.58 and it reached its 52-weeks high on March 15th 2021 when it traded at USD 278.57. Since its high, the stock price slightly decreased and closed at USD 233.34 on July 29th 2021.

The future price of the stock is subject to several political, industrial and sector specific as well as economic factors. Investors should consider these risks when making their investment decisions. Developments can be different at any time than investors anticipated on, which could result in capital losses.

Don’t miss any investment idea. Subscribe now to the Vontobel newsletter!

Vontobel products on Boeing are tradable at DEGIRO.

Discover Vontobel’s product on our Website.

Important legal information:
This information does not constitute a financial analysis, but product advertisement. Thus it does not meet the legal requirements to ensure the impartiality of financial analysis and is not subject to trade prohibition before the publication of a financial analysis.
Fordetailed information, particularly regarding the structure and the risks associated with an investment in the derivative financial instruments, prospective investors should read the Base Prospectus, which is available together with the Final Terms and any supplement to the Base Prospectus in electronic form on the issuer’s website: http://beursproducten.vontobel.com. Additionally, the Base Prospectus, anysupplements to the Base Prospectus and the Final Terms are available inprinted form, free of charge, at the registered office of the issuer: Vontobel Europe AG, Bockenheimer Landstrasse 24, 60323
Frankfurt am Main, Germany.

Investors should consider the applicable selling restrictions.
Companies of the Vontobel group may directly or indirectly pay commissions in varying amounts to third parties (e.g. brokers) in connection with the public offer and the distribution of the derivative financial instruments. Further information is available upon request from your distribution partner. 

08/12/2021 17:13:13