By Valerie Insinna and Abhijith Ganapavaram
(Reuters) – Boeing Co executives on Wednesday stood by their financial targets for 2025-2026 and said the company is working hard to regain the confidence of regulators and customers after a mid-air cabin-panel blowout on a 737 MAX aircraft, lifting its shares 6.1%.
As expected, CEO Dave Calhoun did not offer a financial or delivery forecast for 2024, stating that the company must focus on delivering quality airplanes.
However, Chief Financial Officer Brian West said during an earnings call the company remains confident it will reach free cash flow of about $10 billion and 737 production of 50 per month in the 2025-2026 timeframe, as the company outlined in November 2022.
West added that Boeing expects a steady year of cash flow based on 737 production at its current rate of 38 jets per month, as well as 737 and 787 deliveries from its inventory.
The accident involving an Alaska Airlines-operated MAX 9 jet this month has turned into a full-blown safety and reputational crisis, potentially leading to slower jet production and a loss of more narrowbody market share to Airbus.
The U.S. Federal Aviation Administration (FAA) barred the company from lifting production earlier this month, while increasing its oversight. On Monday, Boeing withdrew a request to the FAA for an exemption it sought to speed up certification of its upcoming MAX 7.
Boeing executives declined to lay out new certification timelines for the MAX 7 and MAX 10, which also features certain systems that need will need to be redesigned before entry into service. However, an “engineering solution” for the MAX 7 could be completed within a year, West said.
Calhoun added that MAX 7 and 10 certification “was progressing reasonably well,” with MAX 7 “close to the finish line” until Boeing pulled the exemption request, which he called “the right thing to do for aviation.”
Despite the production cap on Boeing, executives said it would keep its 737 suppliers producing at the higher rates laid out in its master schedule, which call for a ramp up to 42 per month in February.
“If that means we have to hold more inventory, so be it,” West said. Calhoun added the move would allow some suppliers time to catch up to current rate hikes.
The planemaker reported a narrower-than-expected quarterly loss as well as better-than-expected revenue and free cash flow, though investors are more likely to focus on the company’s expectations as it navigates the current crisis.
Of the 171 MAX 9s grounded by the FAA earlier this month, 129 have returned to service, Calhoun said.
Calhoun told CNBC in an earlier interview on Wednesday he was convinced the door plug issue was completely under control.
He declined to comment on media reports that Boeing did not replace the bolts after removing the door plug from the Alaska Airlines jet that suffered the blowout, citing an ongoing National Transportation Safety Board investigation, but said it would be a “miss” if the NTSB finds the bolts were not installed.
Robert Stallard of Vertical Research Partners said in a note to investors that the full ramifications of MAX safety issues have yet to be seen.
Jefferies projects the company could amass $5.5 billion in free cash flow in 2024 if it delivers 545 737s and 84 787s during the year, but that projection assumes Boeing is able to ramp 737 production to 42 jets per month in the second half.
‘GO SLOW TO GO FAST’
Increasing production of 737 MAX jets is crucial to Boeing’s recovery from a separate safety crisis arising from two fatal crashes in 2018 and 2019 and the subsequent aerospace slump that followed due to the COVID-19 pandemic.
But Calhoun repeatedly stated that the company must be willing to slow down if needed to address quality issues.
“We won’t predict timing. We won’t get ahead of our regulator. We will go slow to go fast,” he said.
Boeing has about 200 MAX jets and 60 787 Dreamliners in its inventory, most of which will be delivered this year, West said.
The 787 production rate is at five per month, Boeing said, adding that it had also resumed 777X production during the fourth quarter.
For the fourth quarter, Boeing reported an adjusted per-share loss of 47 cents, narrower than analysts’ estimates of a loss of 78 cents, as per LSEG data.
The company’s ailing defense business logged $139 million in losses on fixed-price development programs.
Revenue rose 10% to $22.02 billion, above expectations of about $21.1 billion.
It reported 2023 free cash flow of $4.43 billion, achieving its target of $3 billion to $5 billion for the year.
(Reporting by Abhijith Ganapavaram in Bengaluru and Valerie Insinna in Washington, DC; Editing by Anil D’Silva, David Ljunggren and Nick Zieminski)
