Boeing is facing a cash burn for the remainder of 2024 and will not increase its deliveries in the second quarter, the company’s chief financial officer said on May 23.
The aerospace manufacturer is entrenched in a historic public image crisis. Multiple aircraft incidents triggered investigations from the Justice Department and the Federal Aviation Administration (FAA), cutting into the production of planes used by airliners around the world.
CFO Brian West said Boeing will lose cash instead of earn it in 2024 while speaking at the Wolfe Research Global Transportation and Industrials Conference on May 23. He explained that deliveries will not increase in quarter two and that the company has ceased distributing planes to China while the country’s regulators review a cockpit recording device battery.
Many investors were surprised by Mr. West’s remarks, which caused Boeing’s shares to slip by 6 percent during midday trade. The comments contrast with the company’s March forecast, which predicted positive cash flow for Boeing.
“Broadly, I would say there is quite a bit of change happening at company, both large scale change and many, many smaller scale changes, all in the name of improving quality, reducing traveled work, and getting more stable,” Mr. West said.
After the Jan. 5 Alaska Airlines incident, when a panel covering an unused door blew off midflight, Boeing’s aircraft production has slowed considerably as it faces regulatory investigations and scrutiny from lawmakers and the public.
The delay from Chinese regulators over 25-hour cockpit voice recorder batteries will impact Boeing’s cash flow in the second quarter, Mr. West said. The company issued a statement on May 22 saying it is working with its Chinese customers while the country’s Civil Aviation Administration reviews the batteries.
Boeing’s overall commercial jet deliveries will also continue to lag during that time, the CFO explained, adding that customers are “frustrated and disappointed” at the supply chain issues.
“If you’re on the inside, you’re seeing progress in many, many ways,” Mr. West said, but noted that many wish production “would go faster.”
As of May 23, Boeing’s stock is already down by 30 percent in 2024. The company’s production of its 737 MAX dropped to single digits in April, considerably lower than the FAA’s recently imposed limit of 38 planes per month. Boeing slowed its Seattle-area assembly line as it works to fulfill outstanding orders.
These moves followed the Jan. 5 Alaskan Airlines incident, which occurred on a recently manufactured plane. In addition to the production cap, the FAA also imposed a May 30th deadline for Boeing to produce a 90-day report that would address “systemic quality-control issues.” The company is on a “long road” to address its safety issues, FAA Administrator Mike Whitaker said on May 23.
Boeing is overhauling its manufacturing process and looking for a new CEO. Dave Calhoun already announced his departure by the end of 2024, but shareholders recently voted to keep him on the company’s board.
The Justice Department is also considering criminal prosecution of Boeing after it announced on May 14 that the company violated its 2021 agreement to defer prosecution after the 2018 and 2019 737 MAX crashes that killed 346 people. The agency will decide by July 7 whether it will prosecute the aerospace company.
Boeing is also looking to acquire Spirit AeroSystems, which manufactures the fuselages for Boeing’s 737 MAX. Mr. West said a deal could come later in the year, but due to its size and complexity, Boeing is not rushing negotiations.
“So spirit and Boeing believe that reintegrating this business is important on a variety of fronts … the benefits will be strength of quality and safety,” Mr. West said.
Boeing demerged Spirit AeroSystems in 2005, and it now earns revenue from Boeing’s main competitor, Airbus. Recently, Airbus took on some of Spirit’s operations as production slowed.
