Boeing, on April 24, disclosed a US$355 million loss for the initial three months of the year, grappling with a quality dilemma stemming from a January 5 flight where a panel detached from one of its aircraft.
The reported loss, though significant, was less severe than analysts’ projections, and notably smaller than the US$425 million loss in the corresponding quarter last year. Despite generating over US$16.5 billion in revenue in the first quarter, a decrease from the previous year, the company saw a substantial cash burn of nearly US$4 billion, surpassing analyst forecasts in both instances.
The panel detachment incident, occurring on a 737 Max 9 jet during an Alaska Airlines flight inflicted a considerable blow to the Boeing, reigniting apprehensions about Boeing’s practices, notably following two fatal crashes involving 737 Max 8 planes five years prior. In response to the January 5 flight, Boeing has undertaken measures to enhance quality standards, such as expanding inspections, altering work procedures, enhancing training and actively seeking more feedback from its workforce.
Amid heightened scrutiny from the Federal Aviation Administration (FAA), Boeing’s 737 production has been capped at 38 planes per month, although actual production levels remain below that mark. The FAA has mandated Boeing to devise a quality improvement plan by the end of May. During a call with financial analysts, CEO Dave Calhoun assured that Boeing has maintained regular communication with the FAA throughout the plan’s development.
Boeing had aspired to produce 50 737s and ten larger 787s per month from next year onwards. However, analysts cast doubt on the company’s ability to meet this target. Calhoun indicated during the call that the acquisition of Spirit would significantly contribute to achieving those objectives. The recent crisis notably slowed down deliveries in the first quarter, though the company secured a respectable 126 net new orders. This included a substantial order from American Airlines for dozens of 737 Max 10 planes, pending FAA certification. Boeing disclosed an order backlog of 5,600 planes valued at US$448 billion.
Following the announcement of the first-quarter results, Moody’s downgraded Boeing’s debt one notch to its lowest investment-grade rating, Baa3, citing the “inadequate performance” of Boeing’s commercial plane division.
