Boeing’s reduced production of its 737 MAX aircraft has posed challenges to its recovery efforts, as it navigates a challenging period following a mid-air incident in January. CEO Dave Calhoun acknowledged the company’s current difficulties but stressed that Boeing is deliberately slowing the process to enhance safety and quality. Calhoun highlighted the paramount importance of these factors, emphasizing that lower deliveries may strain customers and finances.
Boeing has witnessed some improvements in the 737 factory, indicating more predictable and stable production cycles. However, current output levels remain low, as reported by Reuters earlier this month, with a significant decline in the production of the cash-cow 737 MAX amidst increased factory checks by U.S. regulators. Analysts have raised concerns that the slow pace of deliveries could delay Boeing’s financial and production objectives. The company’s CFO recently stated that it will require additional time to achieve its 2022 goal of generating annual cash flow of approximately $10 billion by 2025 or 2026. This target is considered a crucial milestone as Boeing strives to accelerate its recovery from the earlier crisis triggered by two MAX jet crashes in 2018 and 2019.
Boeing anticipates a more gradual increase in production rates and deliveries of its 787 widebody jets due to shortages of critical components from suppliers, as indicated in a memo released on Monday. Following the January 5th incident involving an Alaska Airlines-operated jet, the Federal Aviation Administration (FAA) imposed a production cap on MAX jets and instructed Boeing to develop a comprehensive plan addressing systemic quality-control issues.
Despite constrained production at Boeing and its competitor Airbus, demand for new aircraft remains robust. However, Airbus has widened its lead in the narrowbody market during the first quarter. Calhoun stated that Boeing expects to have largely delivered its existing inventory of 737 and 787 aircraft by year-end, generating much-needed cash flow. He added that the company’s defense business, which has experienced losses in recent quarters, is expected to improve to more traditional levels of performance.
Boeing delivered 67 737 aircraft in the quarter ending March, representing a 41% decrease compared to the previous year. Aircraft manufacturers receive the majority of their revenue upon aircraft delivery. Consequently, quarterly revenue declined by 8% to $16.57 billion, marking its first revenue decline in seven quarters. Boeing reported a first-quarter cash burn of $3.93 billion, significantly higher than the $786 million cash burn reported a year earlier. Adjusted loss per share narrowed to $1.13, an improvement from the $1.27 loss reported in the previous year.
