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Geopolitics leads Boeing to downgrade dozens of jet orders

UPDATED: Tue., April 12, 2022

Traffic drives in view of a massive Boeing Co. production plant, where images of jets decorate the hangar doors last April in Everett. Boeing is dropping more than 100 planes from its backlog of orders.  (Elaine Thompson)
Traffic drives in view of a massive Boeing Co. production plant, where images of jets decorate the hangar doors last April in Everett. Boeing is dropping more than 100 planes from its backlog of orders. (Elaine Thompson)
By David Koenig Associated Press

Boeing has removed 141 airplanes from its backlog of pending orders, many of them because of what it termed geopolitical considerations including restrictions on sales because of sanctions like those imposed on Russia for its war against Ukraine.

That means that Boeing now questions whether those sales will ever be completed because of sanctions.

Boeing still has more than 4,200 undelivered orders. Under U.S. accounting rules, Boeing regularly adds or removes orders from the backlog, but usually only when an order is canceled or the buyer’s financial problems put the deal in jeopardy.

This time, however, the company said Tuesday that about two-thirds of the 130 Boeing 737s that it removed from the backlog resulted from geopolitical reasons including sanctions. The move suggests that 85 to 90 sales were, in effect, downgraded to questionable because of the sanctions.

Boeing did not identify the customers. The company previously indicated it had undelivered orders for 34 planes with Russian carriers Utair and Volga-Dnepr and seven with SkyUp Airlines of Ukraine. A company spokeswoman said planes ordered by leasing companies but destined for a Russian airline were also removed from the backlog.

In the past 10 years, Boeing has taken orders for 86 planes from Russian companies including 30 from Utair, 22 from Sberbank Leasing and six from Aeroflot, the nation’s flag carrier.

Boeing announced the backlog changes while reporting it took 38 orders for planes in March, most of them single-aisle 737 Max jets. Los Angeles-based Air Lease Corp. placed an order for 32 Maxes.

Boeing Co. said it delivered 41 planes in March, including 37 737s, most of them Max models. The Chicago-based company has delivered 95 planes so far this year, providing crucial cash because airlines typically pay a large part of the purchase price on delivery.

The United States and its allies have been imposing steadily escalating sanctions on Russia since it invaded Ukraine in February.

Last week, Boeing’s European rival, Airbus, announced that it canceled an Aeroflot order for two planes. Airbus, which uses different accounting standards, still has an Aeroflot order for 13 planes and 14 planes for Russia’s Ilyushin Finance Co. in its backlog.

Sanctions have also forced Boeing and Airbus to stop providing aircraft parts and services to Russian airlines. Aviation consultant IBA said that Russian airlines will be able to cannibalize parts from their planes for a while, but the lack of spare parts will have “a significant impact” on them in six to 12 months.

Boeing shares rose more than 1% in afternoon trading.

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