Boeing Sees Bigger Q1 Cash Burn as 737 Output Cut

Boeing said on Wednesday it would burn more cash in the first quarter than previously expected and pushed back a company cash-flow goal as it constrains 737 production to improve quality amid a worsening crisis at the U.S. planemaker.

CFO Brian West said Boeing would produce fewer than the maximum 38 737 aircraft allowed each month under a Federal Aviation Administration imposed limit.

Shares of the company were down 1% before the bell.

“We’re deliberately going to slow to get this right,” West told a Bank of America conference. “We are the ones who made the decision to constrain rates on the 737 program...And we’ll feel the impact of that over the next several months.”

Manufacturing quality at Boeing and major supplier Spirit AeroSystems is under scrutiny following a Jan. 5 incident in which a door plug blew off a 737 MAX 9 plane mid-flight. The two companies are now engaged in tie-up talks.

West added that Boeing’s cash burn in the first quarter will be somewhere between $4 billion and $4.5 billion, “higher than we originally planned back in January.”

That is due to a combination of lower deliveries, lower production volumes at its commercial division as well as some working capital pressure.

It will also take longer for Boeing to hit a goal outlined in 2022 of achieving annual cash flow of about $10 billion by 2025 or 2026.

“It’s going to take us longer to get there than we planned,” West said, without elaborating further. “But we believe that the actions that we’re taking right now better position us for that long term.”

West said margins at the commercial airplanes business would be “more like negative 20%” in the first quarter, in part due to customer compensation for delivery delays. They will improve through the year but still be negative overall in 2024, he added.

The CFO said that in future Boeing would only take deliveries of fully conforming fuselages from Spirit. Spirit currently assembles the fuselage for the 737 before it is shipped to a Boeing factory in Washington state to be completed.

The door panel that blew off the 737 MAX 9 jet appeared to be missing four key bolts, according to a preliminary report from U.S. investigators.

“For years, we prioritized the movement of the airplane through the factory over getting it done right, and that’s got to change,” West said.

On a possible buyout of Spirit, West said Boeing would fund any deal with a mix of cash and debt, rather than using stock.

March 22, 2024