SEATTLE — After Boeing reported its fourth straight quarterly loss Wednesday, Chief Financial Officer Brian West indicated better times lie ahead.
On a conference call with financial analysts, West said supply chain problems have been easing and the company is raising production rates on its two key commercial jets.
At the Renton assembly plant, the 737 MAX is ramping up from 31 jets per month to 38. And in South Carolina, the rate on the 787 Dreamliner has ticked up from three jets per month to four.
The MAX rate increase is the first step toward a target of 50 jets per month by late 2025 or early 2026.
“We’re confident that the supply chain is coordinated to deliver on this. They’ve known about it for a while and we’re happy to be able to move forward,” said West. “We’ll do it a step at a time and we’re happy we can make this first move to 38.”
And in another sign of confidence in the supply chain and in market demand, West said Boeing now plans to resume production in Everett of the giant new 777X jetliner later this year rather than early next year.
Because of lengthy delays in getting the plane certified, Boeing halted 777X production last year so as to stop building jets that would need to be reworked. The move forward of the resumption of production cuts half a billion dollars off Boeing’s projection for future abnormal costs on the 777X.
The other good news in the second quarter results was that advance payments on big commercial jet orders generated a gusher of cash, boosting Boeing’s valuation on Wall Street.
In a message to employees Wednesday morning, Boeing CEO Dave Calhoun praised the resilience of the workforce in pushing through the continued challenges this year.
“While it can be difficult in the moment, this is what progress looks like,” Calhoun told employees. “I am proud of our team, the progress we’ve made.”
Hefty defense and space write-offs
Boeing lost $149 million in the second quarter, or 25 cents per share, on revenue of $19.8 billion.
That’s down from a profit of $160 million in the same period last year, which was the last time Boeing showed a profit.
In stark contrast, Airbus, which also reported earnings Wednesday, showed a profit of $1.1 billion on revenue of $17.6 billion.
Boeing’s defense and space division had the weakest performance, with write-offs totaling $514 million on three development programs.
The delay to the launch of the Starliner spacecraft, designed to transport crew to the International Space Station, cost $257 million. New estimates for higher production costs on the Air Force’s T-7A jet fighter trainer added $189 million. And schedule delays on building the first MQ-25 aerial refueling drone for the Navy cost another $68 million.
Beyond those write-offs, Boeing lost money even on its legacy military programs many of which are struggling with post-pandemic labor instability.
Calhoun offered the only good news out of that division on the KC-46 aerial refueling tanker. He said Boeing has now fixed the tankers that this spring had quality defects inside their fuel tanks and has resumed deliveries.
The Commercial Airplanes division lost $383 million as Boeing continues to slog through fixes on stored 737 MAXs and 787 Dreamliners.
The most recent problems affecting MAX production were a quality defect in fittings for the vertical tail in the aft fuselage built by Spirit AeroSystems in Wichita, Kan., followed by a collapsed railway bridge that complicated delivery of the fuselages to Renton.
Calhoun said these issues have “all have been contained and will be remedied as we exit the third quarter,” adding that only a few deliveries will be affected in the coming months.
Boeing provided Spirit a $180 million cash advance in the quarter to help it deal with the quality problem.
But longer term rework remains to be done on 220 MAXs that at the end of June were still parked in storage ever since the grounding of the jets following the two fatal crashes in 2018 and 2019.
On each of those aircraft, mechanics have to update their flight control systems, relubricate and oil all the major components that have been mothballed for years and recheck everything is working.
Of the MAXs in storage, 140 had been built originally for Chinese airlines. With the Chinese market still closed due to U.S.-China political tensions, West said Boeing has now remarketed 55 of those jets to other airlines, leaving only 85 still earmarked for China.
Calhoun said the remarketing was done in consultation with the Chinese customers and that he is optimistic that China will reopen its market to Boeing.
“We’re getting good signals,” he said. “I hope it can happen.”
Boeing also has 85 Dreamliners still in storage, all awaiting extensive rework to fix gaps in the fuselage joins.
A surge of production after next year
Calhoun has referred to the rework on the MAXs and 787s as “shadow factories,” requiring a large workforce separate from the main factories that assemble new airplanes.
West reiterated that Boeing expects to clear out almost all the jets in storage by the end of 2024 and to transfer the mechanics doing that rework onto building new jets — implying an especially strong boost to production rates at that point.
Calhoun said demand is well above the current target production rate of 50 MAXs per month and could justify going to 60 jets per month.
“I would love to get to 60,” Calhoun said on the conference call. “When we wind down all of our shadow factory efforts and we can apply all of the labor to those rate increases … then we’ll be talking to all of you about 60.”
“But I don’t want to get ahead of myself,” he cautioned.
West said that as production and deliveries increase, the Commercial Airplanes division should become profitable by the end of this year or early next.
Airbus on Wednesday reiterated that it is progressing toward its production target of 75 single-aisle A320neo family jets per month in 2026, most of which are likely to the larger and longer-range A321neo model.
In a conference call with analysts, CEO Guillaume Faury said Airbus is committed to “ramping up production across all our commercial aircraft all at the same time.”
Boeing’s Calhoun, looking ahead to the 2030s, answered a question about the X-66A experimental aircraft being developed by NASA and Boeing as a possible basis for the company’s next all-new airliner.
“We are intent on proving this technology. If it matures the way we think it will, and that NASA frankly thinks it will, I do think it will see service,” Calhoun said. “We just have to prove and deploy the technology. If it behaves like it did in the wind tunnel, we’re in a pretty good place.”
The only Boeing division that made money in the second quarter was its services unit, thanks to strong demand for aftermarket product support.
For Wall Street, the focus was on free cash flow — cash generated minus cash spent on equipment — which came in at $2.6 billion, far ahead of expectations, thanks to a $2 billion boost from those advance payments for big orders placed by Air India, Ryanair, and two Saudi state airlines.
Boeing paid off $3.4 billion in debt during the quarter, reducing its net debt to $38.5 billion.
Financial analyst Rob Stallard with Vertical Research partners, in a message to investors, noted the profits in the Services division, the increasing production of commercial jets and the flattering cash flow result, offset by the negatives that “defense continues to bleed money, and supply chain remains a challenge.”
Overall, he called it “a much better performance than what the company has reported in the not too distant past.”
