Boeing says cash flow is worse than it thought

Boeing is grappling with production and quality issues.  REUTERS/Peter Cziborra/File Photo/File Photo (REUTERS)
Boeing is grappling with production and quality issues. REUTERS/Peter Cziborra/File Photo/File Photo (REUTERS)

Summary

  • Plane maker expects to burn through billions more in current quarter and be cash-flow negative for the full year, finance chief says

Plane maker expects to burn through billions more in current quarter and be cash-flow negative for the full year, finance chief says

Boeing said it would burn billions of dollars more than expected in the coming months and likely won’t generate cash for the full year, signaling the jet maker is struggling to contain the financial fallout from cascading production and supply-chain issues.

A month after announcing a nearly $4 billion hit in the year’s first quarter, finance chief Brian West warned investors Thursday that the company is on track for a similar or bigger cash hole this quarter.

Boeing shares fell more than 7% in Thursday trading. The stock has lost roughly a third of its value so far this year, erasing more than $50 billion in market capitalization.

West also told investors that Boeing is unlikely to generate cash for the full year as the company deals with slowing production of its jets.

It is a bleaker picture from a month ago when the company said it expected to narrow its cash burn this quarter, and end 2024 cash-flow positive.

“We have frustrated and disappointed our customers because of some of the production and supply-chain issues we are up against," West said at an industrials and transportation conference in New York. He added that Boeing should begin generating cash in the second half of the year.

Boeing is grappling with slower production of its bestselling 737 MAX jets as it roots out quality problems after January’s near-catastrophe on an Alaska Airlines flight. The troubles have drawn increased regulatory scrutiny and triggered a management shake-up.

West said Thursday that 737 deliveries will remain well below the company’s goal of 38 jets-per-month through June. Boeing delivered 67 of the planes in the first three months of the year and is on track for about the same number in the second quarter, he said. He said production will pick up later in the year.

“We can’t push the factory too hard or the system too hard because the payoff, if we do this right, is going to be big beyond 2025," West said.

Adding to the woes have been a string of unrelated issues that are both slowing production and preventing Boeing from delivering planes it has already built.

Problems range from parts shortages to the recent revelation, disclosed by Boeing, that its employees may have skipped some inspections on 787 Dreamliners and falsified inspection records. Boeing as of this week hadn’t produced a new 787 this month, according to analysts. Dozens of the planes remain parked outside the jet maker’s North Charleston, S.C., plant awaiting delivery.

The company’s monthly jet deliveries in April hit their lowest level since the onset of the pandemic, when the decline in air travel brought jet production to a near standstill.

The latest issue: Boeing said this week that China has temporarily stopped taking delivery of MAX 8 jets so it can review batteries included in the 25-hour cockpit voice recorder aboard the planes. U.S. and Chinese regulators are in talks about the matter, and Boeing said Wednesday that it would defer to those agencies.

The company said the Federal Aviation Administration and European regulators have signed off on the system, which meets requirements of some non-U.S. air-safety agencies that voice recorders capture 25 hours of audio instead of two.

Boeing had 85 of the China-bound MAX jets in inventory at the end of 2023 and delivered 22 so far this year. Deliveries resumed this year after a yearslong freeze by Beijing following two fatal crashes of the 737 MAX 8.

The company last month tapped debt markets to raise $10 billion as investors fret over the company’s liquidity. It ended March with $7.5 billion of cash and investments, less than half what it had at the start of the year.

In April, Moody’s Investors Service downgraded its rating on Boeing’s unsecured debt by one notch to Baa3, the lowest investment-grade level. Moody’s expects that cash-flow pressures will persist through 2026.

Boeing has said it is in talks to acquire Spirit AeroSystems , which makes fuselages for the 737, to help improve its quality.

West said the company is optimistic it can reach a deal with Spirit by the end of June. The talks have dragged out amid negotiations with rival Airbus about control of Spirit factories that produce parts for Airbus jets.

Write to Sharon Terlep at sharon.terlep@wsj.com

 

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