An American Airlines Boeing 737 MAX 8 flight from Los Angeles approaches landing at Reagan National Airport shortly after the FAA announced the planes would remain grounded in Washington, United States, March 13, 2019.
Joshua Roberts | Reuters
Boeing will burn cash this year and deliveries of new planes will not improve in the second quarter over the first as the manufacturer struggles with a variety of production challenges related to its best-selling planes, the company’s CFO Brian West said on Thursday.
A month ago, West predicted that Boeing would generate free cash flow “in the low single-digit billions.” The new forecast shows the rising costs of the aircraft manufacturer’s recent crises.
Boeing burned through nearly $4 billion of cash in the first quarter, and West said the number could be similar or “possibly slightly worse” in the second quarter, but that the company would likely start generating cash again in the second half of 2024 .
The company’s aircraft deliveries fell to their lowest level since the pandemic in the first quarter. The majority of the aircraft price is paid upon delivery to the customer.
Boeing shares fell more than 7% on Thursday following West’s comments at a Wolfe Research industry conference, a decline that weighed on the Dow Jones Industrial Average.
“We have frustrated and disappointed our customers due to some of the manufacturing supply chain issues we are facing,” West said at the conference. “And while I understand that frustration, the most important thing we can do for our customers and the industry supply chain is to focus on the ongoing actions so that we can stabilize this production system, improve quality and … become more predictable.”
Boeing CEO Dave Calhoun said in March he would step down at the end of the year, and the company replaced the chairman and chief executive of its commercial aircraft division. Ahead of the restructuring, CEOs of major airline customers complained about delivery delays and difficulty scheduling flights due to unexpected disruptions.
Boeing’s latest production problems came to light after a door plug on a nearly new 737 Max 9 exploded in mid-air earlier this year, just as the company was trying to repair years of reputational damage from two fatal Max crashes in 2018 and 2019.
The accident tightened federal scrutiny over the company, whose executives have vowed to address production defects and regain the trust of regulators, airline customers and the public.
Next Thursday, Boeing executives will meet with the Federal Aviation Administration to outline the company’s plan to improve its quality control, the FAA said. The agency gave Boeing 90 days to finalize the plan starting in late February.
Other issues have also emerged, including a pause in deliveries of 737 Max planes to China to check batteries for the cockpit voice recorder. Boeing said in a statement that it is working with “our Chinese customers on the timing of their deliveries as the Civil Aviation Administration of China completes its review of the batteries contained in the 25-hour cockpit voice recorder assembly unit.”
Earlier this month, the FAA said it had opened a new investigation into 787 Dreamliner inspections after the company uncovered “misconduct” by some employees. The authority said it was investigating whether employees had falsified documents.
Parts shortages have also slowed Dreamliner deliveries, Boeing said. American Airlines Last month, the airline announced it would cut some international flights due to delays on wide-body aircraft. Other carriers including United Airlines And Southwest Airlinessaid they had to scale back growth and hiring plans due to delayed Boeing jets.
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2024-05-23 20:20:45
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