An American Airlines Boeing 737 MAX 8 flight from Los Angeles approaches to land at Reagan National Airport shortly after the FAA announced that the planes were being grounded by the United States in Washington, March 13, 2019.
Joshua Roberts | Reuters
Boeing will consume all cash this year, and deliveries of novel planes will not improve in the second quarter from the first as the manufacturer faces a series of production challenges related to its best-selling planes, the company’s chief financial officer, Brian West, said Thursday.
A month ago, West forecast that Boeing would generate free cash flow “in the low-single-digit billion range.” A novel forecast shows the rising costs of the planemaker’s recent crises.
Boeing burned through nearly $4 billion in cash in the first quarter, and West said the number could be similar or “probably a little worse” in the second quarter, but the company would likely return to generating cash in the second half of 2024.
The company’s first-quarter aircraft deliveries fell to their lowest levels since the pandemic. Most of the price of the aircraft is paid when it is handed over to the customer.
Boeing shares fell more than 7% on Thursday after West’s comments at the Wolfe Research industry conference, weighing on the Dow Jones Industrial Average.
“We have frustrated and disappointed our customers because of some of the manufacturing supply chain issues we are facing,” West said at the conference. “And while I understand that frustration, the most essential thing we can do for our customers and the industry supply chain is to focus on the activities that are underway, right now, so that we can stabilize this production system, improve quality and become more predictable.”
Boeing CEO Dave Calhoun said in March that he would step down by the end of the year, and the company replaced the president and CEO of its commercial aircraft division. Before these changes, CEOs of major airline customers complained of delivery delays and difficulties in scheduling flights due to unexpected disruptions.
Boeing’s latest production woes came to featherlight after a door plug on a nearly novel Boeing 737 Max 9 blew out earlier this year, just as the company was trying to repair years of reputational damage following two fatal Max crashes in 2018 and 2019.
The accident heightened federal scrutiny of the company, whose executives have vowed to eliminate manufacturing defects and regain the trust of regulators, airline customers and the public.
The FAA said Boeing leaders will meet with the Federal Aviation Administration next Thursday to outline the company’s plan to improve quality control. The agency gave Boeing 90 days to implement the plan, starting in overdue February.
Other problems also emerged, including: interruption of deliveries of 737 Max aircraft to China for inspection of cabin voice recorder batteries. Boeing said in a statement that it is working with “our Chinese customers on their delivery schedule as the Civil Aviation Administration of China completes its review of the batteries in the 25-hour cockpit voice recorder assembly assembly.”
Earlier this month, the FAA said it had opened a novel investigation into inspections of 787 Dreamliners after the company exposed “inappropriate conduct” by some employees. The agency said it was investigating whether employees falsified records.
Boeing says parts shortages have also slowed Dreamliner deliveries. American airlines last month it said it would cut some international flights because of wide-body jet delays. Other carriers, including: United Airlines AND Southwest Airlinessaid it had to scale back growth and jobs plans because of Boeing plane delays.
