Boeing burned through nearly $4 billion in the most recent quarter as fallout from the Alaska Airlines midair accident exacted a financial toll.
The jet maker reported a $355 million loss as revenue fell 8% from a year ago in quarterly results that were slightly better than expected. Under pressure from airlines and regulators to clean up its operations, Boeing has slowed its factories and has stopped providing most financial targets.
“Near term, yes, we are in a tough moment,” outgoing Chief Executive Dave Calhoun said in a message to employees. “Lower deliveries can be difficult for our customers and for our financials. But safety and quality must and will come above all else.”
Boeing is building fewer of its 737 MAX jets as the company weeds out quality problems at the Renton, Wash., factory that makes the planes. The company faces added inspections and heightened regulatory scrutiny following the Jan. 5 near tragedy. It delivered 83 commercial airplanes in the March quarter, a 36% drop from a year ago.
The production slowdown of the bestselling planes means the company’s operations are burning cash. Boeing warned investors last month that it would take a hit of between $4 billion and $4.5 billion for the year’s first quarter, larger than it previously forecast. The company ended March with $7.5 billion of cash and investments, less than half what it had at the start of the year.
Meantime, Boeing faces a separate problem with its 787 Dreamliner. A shortage of some key parts means the company can’t increase production of the wide-body jets as quickly as it had hoped.
For the March quarter, the company reported an adjusted loss of $1.13 per share on revenue of $16.6 billion. On that basis, analysts had predicted an adjusted loss of $1.63 per share on revenue of $16.2 billion.
Shares of Boeing were hovering around $168 in Wednesday afternoon trading, little changed following the release of the quarterly results. The shares have slumped more than 30% so far this year.
Calhoun said he is confident the company can ramp up 737 production to levels that will enable the company to hit its annual free-cash-flow target of $10 billion by 2026. That would require churning out 50 737 jets a month, more than double the company’s current delivery level. “That’s the bet we’re making and I’m confident we can get there,” he said in a Wednesday call with analysts.
The results come a month after Boeing announced Calhoun will exit at the end of the year as part of an executive shake-up. The head of Boeing’s commercial-aircraft business, Stanley Deal, stepped down and its board chair, Larry Kellner, won’t stand for re-election.
Calhoun said Boeing is seeing results from efforts to improve quality. The biggest improvement came from Boeing’s move to require defect-free fuselages, he said. The company has said faulty parts from jet-fuselage supplier Spirit AeroSystems are a major factor in its own quality issues. “When we get a clean one, it whistles through the factory,” he said.
On Tuesday, Spirit said Boeing would make $425 million in advance payments to cover costs tied to Boeing’s quality-improvement efforts.
Spirit’s factory in Wichita, Kan., made the fuselage involved in the Alaska Airlines door-plug blowout in January.
Spirit now must make its own quality improvements, while dealing with inventory buildup as well as a new mandate from Boeing that fuselages must be defect-free before being shipped to Renton.
Boeing is in the midst of negotiations with Spirit about acquiring the company. The talks have dragged out amid negotiations with rival Airbus about control of Spirit factories that produce parts for Airbus jets, according to people familiar with the matter.
Major aspects of the deal still need to be hammered out, Boeing finance chief Brian West said Wednesday. The companies remain in talks over price, terms and offloading factories. “We believe in the strategic logic of the deal, but we will take the time to get this right,” he said in a call with analysts.
Write to Sharon Terlep at [email protected]
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