Boeing (NYSE:BA) will experience negative free cash flow in 2024, with no increase in deliveries expected in the second quarter, CFO Brian West announced on Thursday. The U.S. planemaker faces a severe crisis affecting the production of its best-selling aircraft.
Speaking at the Wolfe Research Global Transportation and Industrials Conference, West projected negative full-year free cash flow, contrasting with the previous outlook of positive cash generation in the low single-digit billions. This unexpected forecast led to a 6% drop in Boeing shares by midday, exacerbating the company’s issues as production challenges and delayed deliveries to China undermined earlier optimistic projections for 2024.
A portfolio manager, preferring to remain anonymous, expressed surprise at the rapid change in Boeing’s outlook.
Boeing’s jet production has significantly slowed due to increased regulatory scrutiny following a January incident where a door plug blew off an Alaska Airlines jet mid-flight. West confirmed a recent Reuters report about delays in plane deliveries to China caused by a Chinese regulatory review of batteries used in cockpit voice recorders, impacting second-quarter free cash flow.
On Wednesday, Boeing stated it is collaborating with Chinese customers to schedule deliveries as the Civil Aviation Administration of China reviews the batteries within the 25-hour cockpit voice recorder. West acknowledged that commercial jet deliveries would not increase in the second quarter compared to the first, adding that supply chain and production issues have frustrated and disappointed customers.
“Progress is being made internally,” West said, though he noted that “everyone wishes it would go faster.”
Boeing’s stock had already fallen 30% this year prior to the day’s trading. Production of the Boeing 737 MAX fell to single digits in April, significantly below the U.S. Federal Aviation Administration cap of 38 jets per month, as workers slow the assembly line near Seattle to complete pending work.
The Alaska Airlines incident on a new jet led U.S. aviation regulators to limit Boeing’s production levels until safety issues are addressed. Boeing is overhauling its manufacturing practices and searching for a new CEO to replace Dave Calhoun by year-end.
U.S. enforcement officials are considering whether to charge Boeing for violating a previous agreement that protected it from prosecution following the 2018 and 2019 jet crashes.
The FAA has set a May 30 deadline for Boeing to submit a 90-day report addressing “systemic quality-control issues.” FAA Administrator Mike Whitaker commented that Boeing has a “long road” to resolving safety concerns.
Separately, the U.S. Department of Justice will decide by July 7 whether to prosecute Boeing for breaching its obligations under a 2021 agreement that shielded it from criminal prosecution over the fatal 737 MAX crashes.
Boeing is also negotiating to acquire 737 MAX fuselage supplier Spirit AeroSystems. West mentioned a potential deal in the second quarter, noting its complexity and the need for careful consideration. Boeing spun off Spirit in 2005, and the company now earns revenue from Boeing’s rival Airbus, which seeks compensation for taking on some of Spirit’s operations.
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