Boeing is set to encounter a mix of hurdles and prospects in 2025 as it strives to maximize its potential within both its commercial and defense sectors. At the heart of its strategy lies the need to efficiently manage its considerable backlog of orders across these divisions.
Ending this past year on a high note, Boeing secured a significant order from Pegasus Airlines, reaffirming the ongoing demand for its aircraft. If Boeing wants to deliver strong returns to investors, a key focus should be improving operational execution in 2025.
With that in mind, let’s dive into three critical areas Boeing investors should keep an eye on in 2025.
Tapping into Potential with the 737 MAX
Pegasus Airlines, located in Turkey, has placed a solid order for 100 Boeing 737 MAX jets, with an option for another 100, showcasing the robust demand and extensive order backlog for this model. By the close of November, Boeing’s total commercial airplane backlog numbered 6,268, with the 737 MAX alone accounting for 4,818.
For perspective, earlier this year, Boeing had targeted a steady delivery rate of 38 737 MAX planes per month by year’s end, equating to 456 annually. This rate reflects a decade-long backlog for the 737 MAX. In 2025, ramping up production of the 737 MAX will be a top priority for Boeing. However, past actions taken to slow production to enhance manufacturing quality—stemming from a 2024 Alaska Airlines incident—combined with industrial action, led to disappointing delivery numbers last year.
To make a turnaround, hitting the original goal of 38 monthly deliveries is crucial. Boeing must ensure supplier readiness to align with this pace, especially since reaching this delivery rate is just the beginning of scaling up. Spirit AeroSystems, who provides fuselages and whom Boeing plans to acquire next year, is grappling with financial struggles, while CFM International, responsible for the engines, fell short of production targets due to persistent supply chain issues in 2024.
Achieving this goal would be a significant win for Boeing’s stock, and stakeholders should closely monitor progress in this area.
Navigating Challenges in Defense
Analyzing Boeing’s defense, space, and security (BDS) segment presents a view of ongoing struggles. The departure of former BDS CEO Ted Colbert in September, succeeded by Kelly Ortberg as Boeing CEO, comes amid difficulties with cost overruns and pressures across several fixed-price development programs. These programs include the KC-46 tanker, MQ-25 drone, VC-25B (commonly known as Air Force One), and the T-7 training aircraft, accounting for roughly 15% of revenue, alongside issues in fighter jets and satellites contributing another 25%.
Boeing has an opportunity for better performance in the BDS unit. Improving profitability in the successful 60% of its business is the initial step. The resolution of labor strikes, which impacted third-quarter earnings, should further aid this segment’s profitability in 2025. By addressing the fixed-price development hurdles effectively, Boeing has the chance to restore BDS to a profitable state.
Ensuring the 777X Stays on Course
Boeing’s 777X orders exceed 480, with 205 coming from Emirates alone. Yet, what should have been 2020’s delivery milestone for the 777X is now only expected in 2026. This delay has frustrated airlines, necessitating fleet modifications, incurring billions in charges for Boeing, and tying up cash in unsold inventory.
Thankfully, market prospects remain strong. United Airlines’ Chief Commercial Officer Andrew Nocella highlighted in mid-October that supply may not match demand for widebody aircraft in the coming years. For Boeing, proving its capability to deliver the 777X on time could bolster investor confidence, given the current low expectations.
Reviving Success
The market landscape favors Boeing in both its commercial and defense sectors, but to truly reward shareholders, the company must address the outlined areas. With labor issues resolved and refreshed leadership in place, Boeing’s narrative hinges on its ability to ramp up 737 MAX deliveries, restore BDS profitability, and deliver the 777X without further delays.
