Boeing reported a slightly reduced first-quarter loss compared to the same period last year. However, the company cautioned that addressing the issues that came to light after the Alaska Air incident would delay its financial recovery and cost it $443 million in compensation to its airline customers. Boeing’s core operating loss was $388 million, or $1.13 per share, compared to $440 million lost on the same basis a year earlier. This result surpassed analysts’ expectations of a $1.63 per share loss in the quarter. However, the improvement was driven by factors outside its primary commercial airplanes unit, where operating losses nearly doubled to $1.1 billion. Revenue plummeted by $1.4 billion, or 8%, to $16.6 billion, as Boeing’s production issues led to a significant decline in jet deliveries to airline customers. The company generates a majority of its revenue from commercial aircraft sales upon delivery to customers. While the financial results exceeded expectations, they are overshadowed by ongoing congressional, regulatory, and public scrutiny surrounding the quality and safety of Boeing’s aircraft. The company faces challenges not only in repairing its damaged reputation but also in satisfying airline customers impacted by delayed aircraft deliveries. Boeing stated that it is taking necessary steps to address the quality concerns. However, these fixes will continue to lead to additional losses and missed delivery targets in the coming months. The company announced that it will produce fewer 737 Max jets than initially planned for the rest of the year while attempting to resolve issues on its assembly lines. It also highlighted that production of its larger 787 Dreamliner will be limited by supplier issues. “We will take the necessary time to strengthen our quality and safety management systems, and this work will position us for a stronger and more stable future,” said CEO Dave Calhoun, who announced plans to step down from his role by the end of the year. The company attributed part of its losses to compensating airline customers for the three-week grounding of the 737 Max 9 jets following a January 5 incident where a door plug blew off an Alaska Airlines flight, leaving a hole in the plane’s side shortly after takeoff. Alaska Air and United Airlines, the two carriers with the most 737 Max 9 planes in their fleets, have announced compensation agreements with Boeing. This incident has prompted multiple investigations into Boeing by the National Transportation Safety Board, the Federal Aviation Administration, and the Justice Department, potentially exposing the company to criminal liability. It has also focused attention on the safety and quality of Boeing’s aircraft, as well as its treatment of employees raising concerns about these issues. Boeing emphasized its commitment to improving quality and safety and encouraged employees to report any concerns. Calhoun expressed confidence in Boeing’s ability to make the necessary changes to return to profitability for the first time since 2018. However, he acknowledged that these changes would delay the timeline for achieving profitability. “While this effort will slow our recovery timing, we are now seeing proof points that give us confidence that we’ll begin to stabilize and improve performance moving forward,” he said during the company’s investors call. Boeing did not provide specific guidance on its projected financial losses for the year or a timeline for returning to profitability. Calhoun expressed confidence in the company’s goal of generating positive cash flow of $10 billion annually, although he indicated that this target may be achieved later within the projected 2025 to 2026 timeframe. “We are absolutely committed to doing everything that we can to make certain our regulators, our customers, and most importantly, our employees and the public are 100% confident in Boeing,” he said. “It is important that our people and our stakeholders understand how promising Boeing’s future looks. Demand across our portfolio remains incredibly strong. Our people are world class. There’s a lot of work in front of us, but I’m proud of our team and remain fully confident in our future.” However, credit rating agency Moody’s expressed less optimism about Boeing’s recovery prospects. It downgraded the company’s credit rating to Baa2, just one step above junk bond status, and assigned a negative outlook, indicating a possible further downgrade in the future. Moody’s stated its belief that “the headwinds buffeting commercial airplanes will now persist at least through 2026.” It also raised concerns that the company’s projected annual cash flow would fall short of the $4.3 billion of debt due in 2025 and the $8.0 billion due in 2026, requiring Boeing to issue new debt to cover these shortfalls. Boeing’s shares, which had declined by 35% year-to-date through Tuesday’s close, fell an additional 3% in afternoon trading following the investors call, despite initially rising over 3% on the narrower-than-expected loss. Boeing has faced a string of financial losses and quality issues with its aircraft spanning at least five years. Two fatal crashes of the 737 Max in late 2018 and early 2019, resulting in 346 fatalities, were attributed to a design flaw in the aircraft and led to a 20-month grounding of Boeing’s best-selling model. The company subsequently encountered quality issues with the 737 Max once it was returned to service. In total, the company has reported core operating losses of $31.9 billion since the grounding began in 2019. Despite these challenges, Boeing reported a record month for orders in December 2023, culminating in one of its strongest years ever in terms of commercial jet sales. Deliveries also reached a five-year high, and the company even reported a rare core operating profit of $90 million for the fourth quarter of 2023. It also announced plans to increase production of the 737 Max throughout 2024 to achieve sustained profitability. However, by the time these improved results for 2023 were reported, the incident involving the Alaska Air flight had already occurred, dampening hopes that Boeing was about to leave its financial troubles behind. While the NTSB has not determined specific fault for the incident, a preliminary investigation revealed that the jet departed from a Boeing factory without the four bolts required to secure the door plug in place.
Boeing Faces Financial Setbacks Amidst Ongoing Safety Issues
