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By Dan Catchpole
October 25, 2023, © Leeham News: Boeing slashed its 737 MAX delivery forecast for the year to between 375 and 400 in its third quarter earnings report on Wednesday. The company attributed the cut to rework and inspections to fix manufacturing problems in aft pressure bulkhead sections produced by embattled supplier Spirit AeroSystems.
As recently as September, though, Boeing’s CFO reiterated its previous projection of 400 to 450 deliveries of its cash cow jetliner. The cut is worse than expected by Wall Street analysts, most of who expected the airplane maker to deliver about 410 737s this year. It maintained its 787 delivery forecast of 70 to 80 airplanes by year’s end.
Boeing recorded a loss of $1.6bn in the third quarter, its worst quarterly performance this year. The company continues to struggle with supply chain and production problems. Boeing’s defense division spilled the most red ink on the ledger book due to problems on its Air Force One (VC-25B) program and losses on a satellite contract. BDS recorded a $924mn loss.
Summary:
- Boeing reports worst quarterly earnings since 3Q in 2022, when it recorded $3.3bn in losses.
- Boeing Defense, Space and Security recorded a $428mn loss on its Air Force One (VC-25B) program and a $315 million loss on a satellite contract.
- The company continues to struggle with supply chain problems and slower-than-expected rework on the 737 program.
- Boeing CEO says losses are a sign of the company’s commitment to a transparent culture.
Boeing Reiterates 737, 787 Production Increases
Despite lowering its 737 MAX delivery target for the year, Boeing still aims to increase 737 production from 31 per month to 38/month by year’s end, according to the press release announcing third quarter earnings.
The company maintained its 787 delivery forecast of 70 to 80 for the year and said that it is “transitioning” 787 production to five/month. Boeing executives previously set the goal of reaching that rate by year’s end. It currently produces four/month. The press release did not say how soon it aims to increase the production rate. It did reaffirm its target of ramping up to 10 787s/month in 2025 or 2026.
Quarterly Losses Led by Defense Program Woes
Boeing’s third quarter earnings report is its worst of the year so far. It did, however, maintain its projected free cash flow of $3bn to $5bn, despite a FCF loss of $310mn during the quarter. The company recorded a $1.6bn net loss in the third quarter, or $-2.70 per share GAAP and $-3.26 non-GAAP. It had revenues of $18bn. The bottom line was dragged down by a $924mn loss by its defense division and a $678mn loss in Boeing Commercial Airplanes. Boeing Global Services posted a profit of $784mn.
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The company recorded a $482mn charge on its Air Force One (or VC-25B) program, which is providing two heavily-modified 747-8s to replace the 30-year-old 747-200s currently used to fly the United States president around. The earnings report does not specify the reason for the loss on the program.
BDS also posted a $315 million loss on a satellite contract “due to estimated customer considerations and increased costs to enhance the constellation and meet lifecycle commitments,” the release states.
The company continued in the third quarter to spend more on research and development this year than it did in 2022. Through the first nine months of the year, Boeing spent $2.5bn on R&D, compared to $2.1bn during the same period last year. Most of that increase is in BCA–$1.5bn through Sept. 30 in 2023 versus $1.1bn during that time a year ago. R&D spending is down at Boeing Defense, Space and Security ($652mn vs $706mn) and Boeing Global Services ($84mn vs $89mn). R&D spending is up in a fourth category simply labeled “Other” ($222mn through the first nine months of 2023 vs $161mn during that time last year).
The airplane maker recorded 398 net orders in the third quarter, including 150 737 MAX 10s for Ryanair, 50 787s for United Airlines and 39 787s for Saudi Arabian Airlines. BCA delivered 105 airplanes during the three-month period.
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