For much of the past 50 years, the 737 model passenger plane has been the workhorse of the Boeing (BA) fleet. The 737 Max premiered in 2015 as the latest and greatest model that would dominate Boeing production with over 600 planes a year. With the crashes of 2018 and 2019 after just a couple years of full service, the Max was grounded and production halted in 2020. Today Boeing still produces 60% fewer Max’s than in 2019. The good news for Boeing is that air travel will continue its strong secular growth for decades to come. Being one of only 2 mass passenger aircraft makers in the world, they are virutally guaranteed to accelerate sales as their planes resume full-service approvals globally in early 2022. Once Covid mandates are removed for travelers, order volumes will soar past historical milestones with a significant pent up demand to satisfy.

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China’s domestic airlines are the last major country that will complete pilot training on the 737 Max in early 2022. Orders from China are critical as they are estimated to account for 100 to 150 of 737 deliveries a year by 2023. The 2021 production of the 737 Max was a meger 19 a month which will be bumped to modest 31 a month by early 2022 and a whopping 50 a month (600 a year) in 2023.  Before Covid and the 737 Max grounding, Boeing and Airbus were producing over 800 passenger planes a year. The loss of the Max has given Airbus a huge lead these past few years and investors have tired of waiting for Boeing to take off.  As of Q3 2021, Boeing and Airbus delivered 241 and 424 aircraft respectively, compared to 98 and 341 in the first nine months of 2020. Airbus is expected to retain the airplane delivery crown for years to come due to the company’s comfortable backlog lead over its American rival, which is an embarrassing contrast to Boeing’s dominance in years past. Some estimates at Airbus project 840 to 900 planes a year delivered by 2024-2025. Should Boeing retrun to parity with its rival, it would translate to well over 300% revenue growth and likely a record stock price in the upper 400’s. The final ‘All Clear’ arrives when Covid is contained on a sustained basis to spur Governments to roll back social and travel mandates and a resumption of international air travel.

While we assume Covid curtailment of travel is transitory, investor confidence in Boeing management continues to wane. The numerous faults with its flagship model revealed significant flaws in design, engineering, and management. Adding insult to injury, we have news this month that there are continued flaws in Boeing’s wide-body 787 Dreamliner for international service that caused a cessation of deliveries to customers and forced carriers to eliminate some of their overseas flights in 2022. Boeing will have to compensate Airlines for breach of contract. Investors understandably have lost trust that Boeing management is competent and they have left analysts without credible guidance to speculate on the timing of a return to normal operations. After almost 3 years of mounting misery, we would advise investor patience and use bad news dips into the 155 to 180 zone for adding shares. We expect Boeing to move from a negative $15 Billion operating cash position to a positive $12 to 15 Billion within the next 2 to 3 years. Profits should move from over $10 Billion a year in losses to over $10 Billion in profits by 2024 or earlier in a post-pandemic world. We feel confident that the era of gross mismanagement is ending and the primary caveat remaining for 2022 will be the unknowable state of the pandemic and the Global economy. Rapidly adjustable vaccines and a growing supply of therapeutics should greatly ameliorate serious outbreaks from the Corona strain of viruses over the next few years once we get past the current winter upsurge around February.

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Despite being part of a duopoly controlling the airline industry, Boeing has been a troubled stock with the worst in class management obscuring analysis of its future valuation. Technically we calculate a range of 155 to 180 where we will look for oversold condtions to add more of this stock to the model portfolio with a target in the low to mid 300’s in 2022. Boeing is learning from massive mistakes in fiduciary oversight, accountability and engineering protocols. As the biggest aircraft and defense company in the world that has spent several years paying for its mistakes, we believe Boeing will soar to new heights again and investors will anticipate this once international travel retruns and energizes Airlines to vastly expand their long term order books.