Boeing Reports Net Loss of $1.6bn for Q3 and Lowered Delivery Targets
Boeing, the American aerospace manufacturer, announced a net loss of $1.6bn for the third quarter of this year. The company also reported a revenue of $18.1bn for the same period. This news comes as Boeing faces challenges in meeting its 737 Max delivery targets and tackles financial setbacks in its defense business.
Boeing had anticipated missing its target for 737 Max deliveries this year and revealed that it would be taking approximately $800mn in charges in its defense business, including its renowned Air Force One program. These charges contributed to the net loss recorded in the third quarter.
In a memo addressed to employees, Boeing’s CEO, David Calhoun assured them that despite the challenges faced by the company, it remains on track in its recovery following the grounding of the 737 Max in 2019 and the decline in demand for jets prompted by the Covid-19 pandemic. However, he acknowledged that there is still work to be done.
Boeing expects to deliver between 375 and 400 737 Max planes in 2023. The narrow-body jet constitutes a significant portion of the company’s sales volume. Earlier predictions had targeted 400 to 450 deliveries, but two quality lapses discovered in fuselages supplied by Kansas-based Spirit AeroSystems led to a revision of these estimates.
While most of Boeing’s cash inflow depends on plane deliveries, the company maintained its cash guidance for the year. It still anticipates generating between $3bn and $5bn in free cash this year, although it is likely to fall at the lower end of this range. Analysts believe that this reaffirmation should support a positive reaction to Boeing’s stock.
The ongoing effort to rectify defects in the rear pressure bulkhead on the 737 has proven to be more extensive than initially estimated. Calhoun explained that the company’s stringent quality processes have led to the identification of past non-conformances that need to be addressed. He emphasized the importance of resolving these issues once and for all.
Despite these challenges, Boeing remains committed to increasing production. It plans to raise its monthly output of 787s from four to five and aims to reach 38 monthly deliveries of the 737 by the end of this year.
In regard to Boeing’s defense business, the company reported a $924mn loss for the third quarter. This brings the segment’s losses for the year to nearly $1.7bn, following a loss of $3.5bn in 2022. The defense results for the third quarter were deemed disappointing by Boeing’s Chief Financial Officer, Brian West, who stated that the company had not made as much progress in its recovery as expected.
Boeing also faced financial challenges on its Air Force One project, incurring a loss of $482mn in the third quarter. This was primarily driven by higher manufacturing costs, negotiations with a supplier, and difficulties in staffing the project with workers possessing specialized skills and security clearance. The fixed-price contract initially estimated the cost of Air Force One at $5bn, but former President Donald Trump pressured Boeing to reduce the price.
Boeing also took a $315mn charge on a satellite contract due to increased program costs. To improve margins, the company plans to enhance worker training and avoid signing fixed-price development contracts.
Despite these setbacks, Calhoun emphasized the growing forecast for Boeing’s defense business, particularly in light of ongoing conflicts in Ukraine and the Middle East. He noted the need for a supply chain rebuild and the replacement of essential stores, which is expected to contribute to the robustness of the weapons business.
Boeing’s shares rose slightly over 1% in midday trading to $184.65 following the release of the quarterly results.