An American Airlines Boeing 737 MAX 8 flight from Los Angeles approaches for landing at Reagan National Airport shortly after an announcement was made by the FAA that the planes were being grounded by the United States in Washington, U.S. March 13, 2019.
Joshua Roberts | Reuters
Boeing will burn through cash this year and deliveries of new planes won’t improve in the second quarter from the first, as the manufacturer deals with a host of production challenges tied to its bestselling planes, the company’s CFO, Brian West, said Thursday.
A month ago, West forecast Boeing would generate free cash flow “in the low single-digit billions.” The new forecast shows the mounting costs of the plane maker’s latest crises.
Boeing burned through nearly $4 billion in cash in the first quarter and West said that figure could be similar or “possibly a little worse” in the second quarter, but that the company would likely return to generating cash in the second half of 2024.
The company’s aircraft deliveries in the first quarter fell to the lowest level since the pandemic. The bulk of a plane’s price is paid when it’s handed over to a customer.
Boeing’s shares lost more than 7% on Thursday after West’s comments at a Wolfe Research industry conference, a slide that weighed down the Dow Jones Industrial Average.
“We have frustrated and disappointed our customers because of some of the production supply chain issues that we’re up against,” West said at the conference. “And while I understand that frustration, the most important thing we can do for our customers and the supply chain in the industry is to focus on the actions that are underway as we speak so that we could stabilize this production system, improve quality, and get more predictable.”
Boeing CEO Dave Calhoun in March said he would step down by the end of the year, and the company replaced the chairman and chief executive of its commercial airplane unit. Leading up to the shake-up, CEOs of major airline customers complained about delivery delays and difficulty planning flights because of surprise disruptions.
Boeing’s latest production issues surfaced after a door plug blew out midair from a nearly new 737 Max 9 at the start of the year, just as the company was trying to repair years of reputational damage from two fatal Max crashes in 2018 and 2019.
The accident increased federal scrutiny of the company, whose executives have vowed to stamp out production flaws and regain the trust of regulators, airline customers and the public.
Next Thursday, Boeing leaders are set to meet with the Federal Aviation Administration to present the company’s plan to improve its quality control, the FAA said. The agency gave Boeing 90 days to complete the plan starting in late February.
Other problems have also sprung up, including a pause on deliveries of 737 Max planes to China to review 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 batteries contained within the 25-hour cockpit voice recorder assembly unit.”
Earlier this month, the FAA said it opened a new probe into the 787 Dreamliner inspections after the company disclosed “misconduct” by some employees. The agency said it was looking into whether employees falsified records.
Parts shortages have also slowed deliveries of Dreamliners, Boeing has said. American Airlines last month said it would cut some international flights because of delays of the wide-body jets. Other carriers, including United Airlines and Southwest Airlines, said they had to scale back growth and hiring plans because of delayed Boeing jets.
Credit: Source link
