Business

Boeing warns of first quarter cash burn after door plug blowout crisis

US aircraft maker’s long-term cash flow target will also take longer to achieve than expected

Boeing said its first quarter cash burn rate was higher than previously forecast.

Wed Mar 20 2024 - 12:36

Boeing has warned that it will burn more cash in the first quarter than previously expected as the US jet maker grapples with the consequences of the blowout of a door panel in mid-flight from one of its aircraft.

Chief financial officer Brian West said cash outflow would reach $4bn-$4.5bn in the first quarter, higher than forecast in January. A plan to reach a $10 billion cash flow target by 2025-26 would also take longer, West told a Bank of America conference in London on Wednesday.

Boeing has had to limit production of its 737 Max aircraft in the wake of its latest crisis as it seeks to improve the quality of its manufacturing and deal with increased regulatory scrutiny. The company in January suspended its financial guidance for 2024 after the incident.

“We’re not at the moment where we can manage the near-term for these financial outcomes because of the work at hand around stability,” West said. “Our expectation is that we’ll get more predictable and better positioned, but it will take time.”

READ MORE

For the year, Boeing’s free cash flow will be in the “single-digit billions of dollars,” West said. The company reported $4.4 billion of free cash flow in 2023.

Boeing shares fell 1.9 per cent in pre-market trading on Wednesday. The stock is down almost 30 per cent since the start of the year.

The door panel incident has renewed scrutiny over the quality of Boeing’s safety culture and manufacturing control. A Boeing 737 Max 9 aircraft operated by Alaska Airlines lost a door panel at an altitude of 16,000 feet after it had taken off from Portland, Oregon, on January 5.

A preliminary investigation by the National Transportation Safety Board found that the plane had left a Boeing factory last year lacking four bolts needed to secure the door panel in place.

As part of the incident, regulators have capped Boeing’s output of the 737 Max. West said on Wednesday that production rates of the aircraft would be lower in the first half of the year and rise again nearer the latter part towards 38 planes a month.

West acknowledged that the company needed to “improve upon safety and quality and conformance”.

“There are changes that need to happen ... but we are going to do so diligently and expeditiously,” he said.

“We are deliberately going to slow to get this right. We are the ones who made the decision to constrain rates of the 737 programme below 38 per month ... We will feel the impact of that over the next several months.”

The company is in talks to acquire its supplier Spirit AeroSystems, the company that built the affected door panel, as part of its efforts to improve its manufacturing processes. Spirit supplies the Max fuselage to Boeing and the aircraft maker comprises nearly two-thirds of its business. The operation used to be Boeing Wichita until the plane maker spun it off as a public company in 2005.

West said Boeing would not use equity to fund a potential acquisition but would use a “mix of cash and debt”, adding that the group’s “investment grade” credit rating remained a priority. – Copyright The Financial Times Limited 2024

LATEST STORIES