Boeing has issued a warning indicating a higher than anticipated cash burn in Q1, largely due to problems following an in-flight door panel incident. Brian West, the Chief Financial Officer, announced during the Bank of America conference in London that the cash outflow in this period would hit between $4bn and $4.5bn, a figure in excess of what it had predicted in January. This means the company’s objective of achieving a cash flow of $10 billion by 2025-26 might be delayed.
Boeing has had to curb the production of its 737 Max aircraft due to this latest predicament as it navigates enhanced regulatory review and strives to guarantee improved production quality. After the most recent setback, the firm put its 2024 financial projections on hold.
West noted, “We’re not in a position where we can influence short-term financial outcomes because our primary focus is stability.” He added that it might take some time before the company becomes more predictable and better poised.
As for the full year, West mentioned free cash flow would range in the “single-digit billions of dollars.” In 2023, the company recorded a free cash flow of $4.4 billion.
Boeing’s stock has experienced a drop, down nearly 30% since January, and fell a further 1.9% in pre-market trading on Wednesday.
There has been increased focus on Boeing’s safety practices and manufacturing control, spurred on by the door panel incident. A Boeing 737 Max 9, under the operation of Alaska Airlines, lost a door panel at an altitude of 16,000 feet after it had departed from Portland, Oregon, on January 5.
The National Transportation Safety Board’s investigation revealed that the aircraft left a Boeing factory last year missing four vital bolts necessary for fixing the door panel in place.
Regulators have since imposed a production cap on Boeing’s 737 Max. Projected output of the aircraft will be reduced in H1 and raised again towards the end of the year to approximately 38 planes per month.
West acknowledged the requirement for improvements in safety, quality, and compliance. He concluded by stating, “There are necessary changes that have to be made. We will execute these diligently and swiftly.”
In order to achieve the correct outcomes, we have consciously decided to reduce the pace of our 737 programme to less than 38 per month, a key decision that we made. Over the coming months, the effects of this decision will be evidently felt.
Our company is currently engaged in negotiations to purchase Spirit AeroSystems, the manufacturer of the affected door panel. This acquisition forms part of our strategy to enhance our production processes. Spirit is responsible for providing the Max fuselage to our firm, making up over 60% of its operations. Previously known as Boeing Wichita, Spirit was launched as a separate entity in 2005.
Boeing’s West stated that the potential acquisition would not be financed through equity, but would employ a combination of cash and borrowing. He stressed the importance of maintaining the firm’s “investment grade” credit status. © The Financial Times Limited 2024