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Michael O’Leary predicts 18-month timeframe for Boeing deliveries

Boeing posted results showing it had $7.5 billion in cash and short-term securities, down from $16 billion at the start of the year

Michael O'Leary, chief executive of Ryanair Holdings during a news conference in London on Wednesday. Photograph: Bloomberg

Wed Apr 24 2024 - 15:07

Ryanair expects Boeing to take 12 to 18 months to eliminate backlogs in its aircraft deliveries, group chief executive Michael O’Leary said in London on Wednesday, reinforcing a call for more quality oversight.

It comes as the troubled plane maker released results showing it had burned through $3.93 billion (€3.6 billion) in cash in the first quarter as it seeks to resolve concerns around the quality of its manufacturing.

There was an adjusted loss per share of $1.13 (€1.05), and revenue of $16.57 billion (€15.5 billion) in the first three months.

Boeing expects a slower increase in its production rate and deliveries as it faces scrutiny over quality control since a January mid-air panel blowout on a near-new 737 MAX 9.

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Mr O’Leary said “quality control does need to be improved” and that management at Boeing needed to focus on continuity as it seeks to stabilise its business.

He has held talks with Stephanie Pope, Boeing’s new head of commercial aircraft, twice in the last two weeks and said he is optimistic the manufacturer will be able to ramp up output and deliver close to 40 jets to Ryanair in advance of the peak summer travel season.

“I think all of the signs at the moment are getting more optimistic,” he said. “Now, it’s only a week or two, but that’s the first time deliveries have actually kind of moved forward instead of continuously getting delayed backwards.”

Boeing has come under increasing scrutiny from lawmakers, airlines and regulators following a near-catastrophic blowout of a fuselage panel on a 737 Max 9 during flight in early January.

The Federal Aviation Administration has restricted the plane maker from raising output on the 737 Max beyond the 38-jet monthly pace until they are satisfied the quality measures have taken root.

Ryanair runs a fleet of about 600 mostly Boeing 737 planes, the largest operator of the type outside of the US.

The carrier had previously blamed Boeing’s delivery delays for slowing growth in 2024, and cut its annual passenger forecast and flight frequencies across the network as a result.

Mr O’Leary still expects to see 200 million passengers on an annual basis in the year ending March 2025, although the carrier may be forced to stimulate demand in key markets such as the UK through discounts.

He offered some advice on who should be the next chief executive after the plane maker announced that incumbent Dave Calhoun would step down at the end of the year as part of wider management shake-up.

“The best CEOs and owners are the accountants, the people who do the boring, repetitive day-to-day delivery, and that’s what you need,” said Mr O’Leary. “It’s like, never put a pilot in charge of an airline.”

[ Boeing crisis of confidence deepens with 787 now under scrutiny ]

Boeing ended the reporting period with $7.5 billion (€7 billion) in cash and short-term securities, down from $16 billion (€15 billion) at the start of the year.

Mr Calhoun told employees in a memo that Boeing is “leaving no stone unturned” as it reworks its factories, encourages workers to point out defects and slows down its system to identify faults in its processes.

“Near term, yes, we are in a tough moment,” he said in the memo. “Lower deliveries can be difficult for our customers and for our financials. But safety and quality must and will come above all else.”

Boeing had already cautioned a few weeks ago that it would suffer a cash drain of as much as $4.5 billion (€4.2 billion) in the quarter. By that measure, the earnings release offered a respite at a time when little has gone Boeing’s way.

Its cash use was not as bad as the $4.4 billion (€4.1 billion) outflow analysts had expected, based on data compiled by Bloomberg. Sales and earnings were also better than consensus estimates. The results were boosted by an operating profit at Boeing’s defence division, which had posted negative margins in recent quarters.

Shares have lost 35 per cent in value since the start of the year, the worst performer on the Dow Jones Industrial Average. – Bloomberg, Reuters

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