The competitive Boeing books fewer when more Americans fly
© Reuters. FILE-PHOTO: FILE-PHOTO: The Boeing logo is shown at the LABACE trade fair in Sao Paulo
By Ankit Ajmera and Eric M. Johnson
(Reuters) – Boeing (NYSE 🙂 Co reported a smaller quarterly loss on Wednesday as increased 737 MAX jet deliveries reflected a cautious surge in air travel due to the coronavirus pandemic, despite the contested U.S. aircraft maker filing charges against its Air Force One presidential aircraft took over the program.
However, optimism in a resurgent US domestic travel market is offset by growing concerns about the COVID variants in India and elsewhere, which is dampening the industry’s recovery.
Boeing has shipped more than 85 737 MAX jetliners from a backlog of hundreds as most regulators approved recommissioning after two fatal crashes late last year, increasing sales and cash flow.
However, Boeing’s workhorse for short-haul travel remains banned in the recovering Chinese market, where Boeing continues to face prolonged geopolitical tensions that persisted under US President Joe Biden.
A new electrical grounding issue identified earlier this month on some models of the jet also dwarfed Boeing’s newly confirmed plans to increase 737 MAX production to 31 aircraft per month by early 2022. Airlines have withdrawn dozens of 737 MAX jets for service, awaiting repairs.
Boeing’s recently extended chief executive Dave Calhoun told CNBC that he could not predict when the 737 MAX’s electrical grounding issue would be resolved and expressed concern about India and the long-term recovery in international travel.
But Calhoun said Boeing will return to positive free cash flow in 2022, pointing to signs of a recovery in 2021.
“It’s a turning point,” said Calhoun. “Traffic is really ready to fall back.”
Boeing shares fell 2.9% to $ 235.31, compared to a marginally lower value.
Analysts will urge Calhoun for updates on a flurry of technical and financial challenges, and come forward with plans for a potential new jetliner to combat Airbus’ A321.
Last week, Boeing announced it had extended the required retirement age from 65 to 70 so that 64-year-old Calhoun can stay in the top job.
Calhoun wants to stay in the role until he’s 70, insiders say. His decision surprised many in the industry who viewed him as a short-term crisis manager and sparked the impending exit of Boeing’s respected CFO and heir, Greg Smith, 54.
Boeing also confirmed a sharply reduced production rate of five 787 jetliners per month after production was consolidated at its South Carolina facility.
Because of the impact of the pandemic on long haul travel, demand is lower and the price of 787 retrofits is rising due to manufacturing imperfections embedded in dozens of the advanced jet composite jetliners.
The first 777X Mini-Jumbo is still expected to ship in late 2023 despite certification and design challenges. The combined performance of the new 777X and its 777 legacy model is two per month.
The American aircraft maker reported a core operating loss of $ 353 million in the first quarter, the sixth consecutive quarterly loss, compared with a loss of $ 1.70 billion a year earlier.
Boeing posted a pre-tax charge of $ 318 million for Air Force One presidential aircraft.
Boeing sued supplier GDC earlier this month for failing to complete interior work on the two heavily modified 747-8 Air Force One aircraft. The GDC countered, demanding at least $ 20 million to terminate the contracts. GDC Technics filed for bankruptcy on Monday.
In July 2018, Boeing won a $ 3.9 billion contract to build two 747-8 aircraft for use as Air Force One, with deliveries by December 2024.
In the quarter, Boeing completed a test with a hot fire engine on NASA’s upcoming SLS rocket and began production with the US Air Force’s new trainer jet.