Boeing Is Mostly Over the Pandemic, but Not Its Own Problems

Some of the improvement was thanks to higher profit margins in the defense and services divisions, but the commercial-airplane arm also surpassed expectations. It reported a 268% surge in revenues for the period, and—as was already known—logged 180 new net orders including high-profile MAX purchases by

United Airlines

and

Southwest Airlines.

This placed Boeing ahead of its European rival

Airbus.

Crucially, Boeing managed to ship 50 737 aircraft in the three months through June, freeing up more of its massive stockpile of undelivered planes. Together with much-needed predelivery payments following the new orders, this reduced Boeing’s quarterly cash bleed to just $705 million. Wall Street was expecting an outflow of almost $3 billion.

For Boeing, showing that it could meet its production and delivery targets for the MAX was key. Its share price has significantly trailed Airbus’s over the past few months. Given how many high-profile mishaps the U.S. plane maker has recently been involved in, it was something of a miracle that their five-year performances were roughly the same until recently.

But investors shouldn’t forget that even if the worst of the pandemic is over for aerospace companies, Boeing’s homemade problems aren’t going anywhere.

Another probable cause of the company’s better-than-expected free cash flow was the cut in production rates for its flagship wide-body plane, the 787 Dreamliner, which has been plagued by quality problems since late 2020. Thus, even as the inventory of parked MAX jets is now being run down, larger 787s are taking their place. There are roughly 100 of them in storage and while Boeing initially planned to deliver all of them this year, it now believes the final tally to be less than half of the total.

This may mostly be a short-term issue for 2021 profits, but delivery delays of 12 months or more often give carriers the contractual right to cancel orders, and some could be tempted to use it. The wide-body market, which was oversupplied even before Covid-19, now suffers from coronavirus variants keeping intercontinental routes shut.

Then there is the state-of-the-art Boeing 777X, which has hit further certification hurdles during flight tests that threaten to push the first delivery out to 2024. Since this is now the expected date for long-haul travel to return to its pre-pandemic level, this long delay matters less than it once would have. But it comes on top of other competitive weaknesses, such as the lack of a midrange plane to rival Airbus’s powerhouse A321XLR.

Boeing is finally emerging from a long and fretful night. To catch back up with Airbus, though, it will need to prove that it can still build world-beating planes.

Write to Jon Sindreu at jon.sindreu@wsj.com