Boeing posts third annual loss in a row as Dreamliner prices hit $5.5 billion

Boeing a major milestone in its year-long 737 Max crisis deliveries jump helped generate cash in the fourth quarter for the first time in almost three years.

But now the company is facing mounting spending on its 787 Dreamliner program, which on Wednesday revealed $5.5 billion in costs related to manufacturing defects that have prevented Boeing from making these new ones over the past 15 months Handing over jets to customers.

Shares of the company fell more than 5% in afternoon trade, more than the broader market.

The manufacturer took a pre-tax charge of $3.5 billion for the Dreamliner in the fourth quarter. It expects an additional $2 billion in costs after cutting production of the planes, double its previous estimate.

“We can’t rush it”

Boeing first disclosed the flaws – tiny, improper clearances on some fuselages – in 2020. Defects were also found in other parts of some aircraft, and Boeing had to inspect the undelivered jets.

“While I don’t like any of the allegations, the progress has been significant,” CEO Dave Calhoun told CNBC.screeching in the streeton Wednesday about the 787. He declined to say when he expects regulators to grant approval and deliveries to resume. “We can’t rush it.”

Boeing reported free cash flow of $494 million for the fourth quarter, up from an outflow of $4.27 billion a year earlier, a milestone Boeing executives previously said they wouldn’t hit until 2022. It was spurred by a surge in 737 Max deliveries last year after regulators lifted bans on the jets following fatal crashes in 2018 and 2019.

China

China, a key customer for Boeing and the first country to ground the Max after the second crash, the last month was approaching lift its ban in the planes.

CFO Brian West told analysts on the quarterly conference call that shipments to China could resume “as early as the first quarter” of 2022, which could help the company generate more cash.

Here’s how Boeing compared to analyst estimates prepared by Refinitiv:

  • Adjusted Results: A loss of $7.69 per share versus an expected loss of 42 cents per share.
  • Revenue: $14.79 billion versus $16.59 billion expected.

Boeing lost $4.29 billion last year, its third consecutive annual loss Covid pandemic and production problems continued to affect the bottom line. That’s an improvement from 2020, when the company had a loss of $11.94 billion.

For the fourth quarter, Boeing reported a net loss of $4.16 billion, less than half the $8.44 billion it lost a year earlier. Revenue fell 3% year over year to $14.79 billion, down from $16.59 billion that analysts had expected.

‘renovation year’

“2021 was an important recovery year for us, and together we overcame significant hurdles,” Calhoun said in a note to employees on Wednesday. “While we still have work to do, I am confident that we are well positioned to accelerate our progress in 2022 and beyond.”

Chicago-based Boeing aircraft sales and deliveries increased last year, but deliveries of new planes to airlines still lagged behind European rival Airbus. The US company said it has increased production of the 737 Max to 26 a month, closer to the 31 a month it expects this year and up from the 19 a month it released in its last quarterly report.

But Boeing has been paralyzed for months by halting deliveries of its 787 Dreamliners for much of the past year due to a series of manufacturing defects that have left customers baffled American Airlines and Hawaiian Airlines.

American Airlines said last month it would be cutting its international flight schedule over 787 delivery delays. The airline’s CFO, Derek Kerr, said in an earnings call last week that Boeing is already paying penalties for the delays and “will compensate us for the losses” if there are more delays.

More delays

Kerr had said American expects to start deliveries of the Dreamliner again in mid-April, a timeframe Boeing CEO Calhoun did not confirm on Wednesday. “All I’m saying is that customers know everything we do,” Calhoun said, adding that airlines and Boeing “share the same regulator.”

“The company continues to perform follow-up work on 787 aircraft in inventory and is in detailed discussions with the FAA on the actions needed to resume deliveries,” Boeing said in a earnings release. “In the fourth quarter, the Company determined that these activities will take longer than previously anticipated, which will result in further delays in customer delivery dates and related customer considerations.”

CFO West referred to labor, material and supply chain shortages as “observation posts.”

Boeing’s large fleet of aircraft — 335 Max jets expected to be delivered by the end of 2023 — will provide a buffer, Calhoun said.

“When I think about the supply chain constraints that are out there, I hate that we got here this way, but having a stock of finished aircraft, particularly in relation to the Max, is at this moment beneficial,” Calhoun told CNBC.

recovery from travel

Calhoun said he expects the worst is behind the aviation sector after the pandemic crushed demand for air travel and new planes. Airline executives said in early January they expect international travel bookings to rebound this spring and summer after entry restrictions were lifted in recent months.

The company reiterated on Wednesday that it expects passenger traffic to return to 2019 levels next year or 2024.

Suppliers to Boeing and Airbus General Electric on Tuesday forecast a 20% increase in sales this year at its main aerospace division, which manufactures and repairs aircraft engines.

However, the recovery was bumpy. airlines incl delta, United and American earlier this month predicted the rapid spread of the Omicron variant, which began late last year delay a rebound travel demand by about two months. Executives at those airlines said they expect a strong spring and summer travel season.

On Tuesday, the Transportation Security Administration screened 1.06 million people, the fewest since April 2021.

Boeing (BA) 3Q 2021 loss as Dreamliner flaws drive up prices

An employee works on the tail of a Boeing Co. Dreamliner 787 aircraft on the production line at the company’s final assembly facility in North Charleston, South Carolina.

Travis Dove | Bloomberg | Getty Images

Boeing said Wednesday that defects in its 787 Dreamliners would result in abnormal costs of $ 1 billion and that production would be reduced to about two of the planes per month as it struggles to address quality issues. These issues resulted in deliveries being suspended for most of the past year.

Of this, the manufacturer wrote off $ 183 million in the third quarter.

However, sales improved thanks to higher Aircraft sales and supplies. Boeing said its revenue rose to $ 15.28 billion in the third quarter, an 8% increase from $ 14.14 billion last year. That was below the $ 16.3 billion forecast by analysts. The company reported a net loss of $ 132 million for the quarter, despite being less than the $ 466 million it lost a year earlier.

“Our commercial market is showing improved signs of recovery with the opening up of vaccine distribution and border protocols,” said CEO Dave Calhoun in an employee statement following the results. “When demand returns, supply chain capacity and world trade will be the main drivers of our industry and the recovery of the world economy.”

Boeing’s cash flow from operations improved to minus $ 232 million from $ 4.8 billion a year ago. The company’s share rose 1.4% in pre-market trading.

This is how the company has developed compared to the analyst estimates carried out by Refinitiv:

  • Adjusted results: A loss of 60 cents per share versus an expected loss of 20 cents per share.
  • Revenue: $ 15.28 billion versus $ 16.3 billion, expected.

Last year, Boeing first disclosed quality problems with seams on the hulls of some of its 787s. The problems led to inspections that caused Boeing to suspend deliveries of the aircraft to airline customers, thereby draining the company’s cash.

Deliveries resumed briefly this year, but were suspended again in May due to further inspections. Analysts estimate that Boeing has around 100 of the aircraft in its fleet. The company has repeatedly lowered the production rate for the jetliners. Over the summer, Boeing announced it was producing fewer than five 787s a month.

“The company expects to continue at this rate until deliveries resume and then return to five per month over time,” the statement said.

Boeing has been in successive crises since the first of two fatal crashes of its 737 Max three years ago. While it was a 20-month aircraft lockdown, the pandemic decimated the demand for travel and airplanes.

The company shipped 62,737 in the quarter, the most since Q1 2019, Calhoun said. It manufactures 19 Max aircraft per month, up from 16 in July. The forecast was to increase production to 31 per month in early 2022.

The company’s shares had lost 2% so far this year as of Tuesday’s close of trading, compared to a 22% gain for the S&P 500.

Boeing executives will face analyst questions on Wednesday at 10:30 a.m. ET.