Boeing posts billion-dollar loss, cuts 737 Max delivery forecast

Image credit: Sourced from Boeing

Boeing on Wednesday cut its 737 delivery forecast for this year citing quality issues at supplier Spirit AeroSystems, a temporary setback for the planemaker as it looks to recover from its own set of crises.

Despite a third-quarter net loss of $1.6bn, Boeing stuck to its goal of generating $3bn to $5bn in free cash flow this year.

Shares, which were down in early trade, rebounded to gain 1.7 per cent after the earnings call.

The company was aiming to deliver 400 to 450 737 jets in 2023 but was forced to temper that goal to 375 to 400 jets after two separate quality issues at Spirit, which makes fuselages for the cash-cow narrowbody jets.

Boeing cuts delivery forecast

Boeing plans to meet a delivery target of at least 70 widebody 787 Dreamliners in 2023 and is transitioning from a production rate of four to five jets per month.

The company also intends to keep its 737 production ramp-up plan intact, although narrowbody deliveries in October will continue to hover around the 15 jets delivered last month.

Meanwhile, the company’s ailing defense business continues to struggle with cost overruns on fixed price contracts.

It reported another quarter of negative margins due to combined losses of $933m on its next-generation Air Force One, an unspecified satellite program and a handful of other fixed-price development efforts, executives said.

Boeing CEO Dave Calhoun said the recovery of its defense unit is “slower than I’d like.”

Although Boeing executives repeatedly declined to lay out financial targets for 2024, the planemaker expects free cash flow to be higher than 2023 based on the strength of commercial airplane deliveries, the liquidation of Boeing’s 737 and 787 inventory and the 777X production ramp up, said Chief Financial Officer Brian West.

Earlier this month, Boeing said it had expanded the scope of its inspections of a production defect arising from misdrilled holes that affect its bestselling 737 MAX 8 aircraft.

Boeing’s new 737 delivery target implies about 100 deliveries in the fourth quarter, meaning a “busy holiday season” for the company given low deliveries this month, said Seth Seifman of J.P. Morgan.

The company delivered 70 737 aircraft in the third quarter, down 20 per cent. Planemakers get the bulk of the payment when they hand over jets, so delivery numbers are closely watched.

Despite the issues at Spirit, Calhoun said Boeing’s recent financial agreement with the company, which raises near-term prices Boeing pays on the 787, is a “win-win” that will put the supplier on a path to stability.

For its third quarter through September, Boeing reported a wider-than-expected cash burn of $310m compared with cash generation of $2.91bn a year ago. Analysts had projected a $272m cash burn for the quarter, according to LSEG data.

The company reported a wider than expected loss of $3.26 per share, compared with average analysts’ expectation of $2.96 per share. The company reported $18.1bn in revenue, slightly beating consensus estimates of $18.0bn.