Boeing will burn rather than generate cash in 2024 and second-quarter deliveries will not increase, its chief financial officer said Thursday, as the company faces a full-blown crisis that is squeezing production of its best-selling planes.
Chief Financial Officer Brian West said at Wolf Research’s Global Transportation and Industry Conference that Boeing now expects free cash flow for the full year to be negative, compared with its March outlook for positive cash flow generation in the low single digits.
His comments surprised some investors and sent shares falling 7.6% to $172.21, deepening the company’s troubles as production challenges and delays to deliveries to China upended the upbeat 2024 outlook Boeing had laid out just weeks ago.
“Why did things change so quickly?” said a portfolio manager who holds Boeing shares, speaking on condition of anonymity.
Boeing’s jet production has slowed dramatically since January when a door plug on an Alaska Airlines jet blew off in mid-air, amid increased scrutiny from regulators, airlines and lawmakers.
West also acknowledged a Reuters report on Wednesday that aircraft deliveries to China have been delayed in recent weeks because of an investigation by Chinese regulators into cockpit voice recorder batteries. West said the delays would affect second-quarter free cash flow.
The company said in a statement on Wednesday it was in discussions with its Chinese customer over delivery timing as the Civil Aviation Administration of China completes inspections of the batteries inside the 25-hour cockpit voice recorder.
West said second-quarter commercial jet deliveries would not increase compared to the first quarter of the year, adding that supply chain and production issues were “causing customer frustration and disappointment.”
“From the inside, we can see progress,” West said, but added that “everyone wants to go faster.”
As of today’s opening, Boeing shares had fallen 30% this year.
Reuters reported that production of Boeing’s 737 Max jetliner fell to single digits in April, well below the Federal Aviation Administration’s monthly limit of 38 planes, as workers on an assembly line outside Seattle slowed to complete a backlog of work.
The crash of an Alaska Airlines jet led U.S. aviation regulators to curb Boeing’s production levels until the company begins to address safety issues, the company is overhauling its manufacturing methods and is searching for a new CEO after current CEO Dave Calhoun agreed to step down at the end of the year.
Top U.S. enforcement officials are also considering whether to prosecute the company for violating an agreement that gave it immunity from prosecution stemming from previous jet crashes in 2018 and 2019.
The FAA has given Boeing a 90-day deadline of May 30 to submit a report addressing “systemic quality control issues,” and FAA Administrator Mike Whitaker said Thursday that Boeing has a “long road” ahead to address safety issues.
Meanwhile, the Justice Department is expected to decide by July 7 whether to prosecute Boeing after determining that the company violated its obligations under a 2021 agreement that granted immunity from criminal prosecution over the deadly 737 Max crashes in 2018 and 2019.
Boeing is currently in negotiations to acquire Spirit AeroSystems, a fuselage supplier for the 737 MAX. West said a deal with Spirit could close in the second quarter, but that the deal is too large and complex to be rushed.
Boeing spun off Spirit Airlines in 2005 and now gets some of the airline’s revenue from rival Airbus, which is seeking compensation for taking over some of Spirit’s business.
