Boeing (NYSE:BA) is expected to experience a cash burn in 2024, with no anticipated increase in deliveries for the second quarter, CFO Brian West announced Thursday. Speaking at the Wolfe Research Global Transportation and Industrials Conference, West attributed the negative free cash flow projection to delays in deliveries, contrasting with March’s forecast of positive cash generation in the low single-digit billions. His comments led to a 7% drop in Boeing shares during afternoon trading, compounding the company’s difficulties as production challenges and delayed deliveries to China have undermined an earlier optimistic outlook for 2024.
A portfolio manager who holds Boeing stock anonymously remarked, “How did things change so quickly?”
Boeing’s jet production has significantly slowed due to increased scrutiny from regulators, airlines, and lawmakers following a January incident when a door plug blew off an Alaska Airlines jet mid-flight. West confirmed a Reuters report that recent plane deliveries to China were delayed due to a regulatory review of the batteries powering the cockpit voice recorder.
Boeing stated on Wednesday that it is coordinating with Chinese customers on delivery timings as the Civil Aviation Administration of China completes its review of the batteries in the 25-hour cockpit voice recorder. West noted that commercial jet deliveries will not improve in the second quarter compared to the first, adding that supply chain and production issues have “frustrated and disappointed” customers.
“If you’re on the inside, you’re seeing progress,” West said, though he acknowledged that “everyone wishes it would go faster.”
Boeing’s stock has declined 30% this year. Production of the Boeing 737 MAX fell to single digits in April, far below the Federal Aviation Administration cap of 38 jets per month, as workers slow the assembly line near Seattle to address outstanding work.
Ben Tsocanos, airlines director at S&P Global Ratings, commented, “It’s certainly not good news. We were already expecting this year to fall below our financial expectations, and this is incrementally worse.”
The January 5 incident involving an Alaska Airlines jet prompted U.S. aviation regulators to limit Boeing’s production levels until safety issues are addressed. Boeing is overhauling its manufacturing practices and searching for a new CEO to replace Dave Calhoun by the end of the year.
Additionally, the U.S. Department of Justice will decide by July 7 whether to prosecute Boeing for breaching an agreement that protected it from prosecution following the 2018 and 2019 jet crashes.
The FAA has set a May 30 deadline for Boeing to submit a 90-day report addressing “systemic quality-control issues.” FAA Administrator Mike Whitaker stated Thursday that Boeing faces a “long road” to resolving safety concerns.
Boeing is currently negotiating to acquire 737 MAX fuselage supplier Spirit AeroSystems. West mentioned that a deal with Spirit is possible in the second quarter but emphasized that the complex nature of the deal requires careful consideration. Boeing spun off Spirit in 2005, and the company now earns a portion of its revenue from Boeing rival Airbus, which seeks compensation for taking on some of Spirit’s operations.
Featured Image: Unsplash © Jacob Mathers
