Boeing Delays Delivery of 737 Max Aircraft Due to Production Flaws
Renton, Washington – In a setback for Boeing, the aerospace giant announced on Wednesday that it will be delivering fewer 737 Max aircraft this year than initially anticipated. The reduction in deliveries is due to production flaws that have been detected on some of Boeing’s best-selling planes.
Boeing now expects to hand over between 375 and 400 of its workhorse planes in 2023, down from its previous estimate of 400 to 450. This news comes despite Boeing’s CFO reaffirming the higher estimate during a conference just last month. The decrease in deliveries poses a challenge for both Boeing and its airline customers who are eagerly awaiting the arrival of more fuel-efficient jetliners.
Despite the production problems, Boeing has maintained its expectations for free cash flow in 2023, projecting it to be between $3 billion and $5 billion. Following the announcement of these results, Boeing’s shares rose more than 3% in premarket trading.
“I have heard those outside our company wondering if we’ve lost a step. I view it as quite the opposite,” stated CEO Dave Calhoun in an employee note on Wednesday. Calhoun emphasized that the company has been working diligently to foster a culture that encourages transparency and open communication regarding any issues, regardless of their size. He also expressed confidence in Boeing’s ability to address and resolve the current production problems.
The delays in aircraft delivery have had a significant impact on airlines. Budget carrier Ryanair, for instance, recently had to reduce its winter schedule due to these delays. The carrier cited delivery delays from Boeing as the reason behind the cutbacks.
In the third quarter, Boeing’s commercial aircraft unit saw a 25% increase in sales to $7.88 billion, primarily driven by deliveries of wide-body 787 Dreamliner planes. However, the lower number of 737 deliveries, coupled with abnormal production costs, resulted in a negative operating margin of 8.6%.
Boeing has plans to ramp up the production of the 737 to 38 planes per month by the end of this year. Additionally, the company is transitioning to Dreamliner production at a rate of five per month. It has affirmed its estimate to deliver 70 to 80 Dreamliners in 2023.
In its defense unit, Boeing incurred losses, including a $482 million loss on its Air Force One program due to higher manufacturing costs related to engineering changes and labor instability. The defense unit also experienced a $315 million loss on a satellite contract.
For the third quarter, Boeing reported a narrowed net loss of nearly $1.64 billion, or $2.70 per share, compared to a loss of $3.31 billion, or $5.49 per share, during the same period last year. Adjusting for one-time items, the company’s adjusted loss came in at $3.26 per share, which widens the expected adjusted loss.
Revenue for the period rose 13% from the third quarter of last year to $18.10 billion, slightly surpassing analysts’ estimates.
Boeing executives will address questions about production pace, demand, and strategies for improving margins in the defense unit during a call with analysts at 10:30 a.m. ET.
Please note that this news is still developing, and updates will be provided as they become available.