Boeing: Further 777X Delay Would Cause More Financial Drag

Key Morningstar Metrics for Boeing

• Fair Value Estimate: $246.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

Boeing BA CEO Kelly Ortberg commented to investors at recent conferences that the Federal Aviation Administration certification process for the new 777X is dragging on, which may jeopardize the timeline of the plane’s entry into service, currently slated for mid-2026.

Why it matters: The 777X is a massive plane, and the program to design, manufacture, certify, and deliver it to customers is already about five years late and $10 billion over budget. Getting the jet approved and in customer hands will unlock cash flows Boeing needs to fund future planes.

Between the lines: We believe the circumstances around the 777X’s certification process with the FAA may be somewhat unusual, and Ortberg’s comments suggest they are ultimately untenable. The 777X is the first major aircraft certification project by Boeing after its failures in the 737MAX certification process.

• We see the FAA setting a particularly high bar for documentation and in enforcing other requirements, when it historically gave Boeing far more benefit of the doubt (if not even delegating some inspection authority to the manufacturer).
• We surmise the regulator may be exerting its authority to reestablish its institutional bona fides, reset expectations for how certifications will unfold, or even punish Boeing for past misdeeds.

The bottom line: We anticipate Boeing will officially push its 777X delivery dates back about six months and take another “forward loss” charge, which we estimate at around $3 billion. Reflecting these probable events in our forecast results in a reduction of our fair value estimate from $249 per share to $246.