Boeing CFO Warns of Cash Burn Due to Production Delays in 2024

Boeing’s CFO announced on May 23 that the company is facing a cash burn for the rest of 2024 and will not be increasing deliveries in the second quarter. The aerospace manufacturer is currently dealing with a major public image crisis as various aircraft incidents have led to investigations by the Justice Department and the FAA, impacting the production of planes used by airlines globally.

Brian West, the CFO, mentioned at the Wolfe Research Global Transportation and Industrials Conference on May 23 that Boeing will be losing revenue in 2024 and deliveries will remain stagnant in the second quarter. Plane distribution to China has been stopped as the country’s regulators review a cockpit recording device battery.

Investors were taken aback by West’s statements, causing Boeing’s shares to drop by 6% during midday trading. This contradicts the company’s previous forecast in March which anticipated positive cash flow.

Due to investigations and scrutiny resulting from the Alaska Airlines incident on Jan. 5, Boeing’s aircraft production has slowed down significantly. The company is grappling with regulatory probes and public and legislative scrutiny.

The delay in deliveries to China due to battery review for cockpit voice recorders will impact Boeing’s cash flow in the second quarter, Mr. West added. The company is collaborating with its Chinese clients while the Civil Aviation Administration of China assesses the batteries.

Boeing’s overall commercial jet deliveries will continue to be low during this period, according to the CFO, who mentioned that customers are not pleased with supply chain challenges.

Mr. West stated that progress is being made internally to improve quality and efficiency, although many wish for faster production.

Boeing’s stock has already dropped by 30% in 2024. The production of the 737 MAX has significantly decreased since April, falling well below the FAA’s limit of 38 planes per month. Boeing has slowed its assembly line in Seattle where it is working to fulfill existing orders.

Following the Alaska Airlines incident on Jan. 5, the FAA has mandated a 90-day report by May 30 addressing quality-control issues. The company is facing a challenging road ahead to address safety concerns, as stated by the FAA Administrator Mike Whitaker on May 23.

Boeing is revamping its manufacturing process and is in search of a new CEO. Dave Calhoun’s departure by the end of 2024 has been announced but shareholders have expressed their desire to retain him on the company’s board.

The Justice Department is contemplating criminal action against Boeing due to violating terms of a 2021 agreement concerning the 2018 and 2019 737 MAX crashes that resulted in 346 fatalities. A decision on prosecution is expected by July 7.

Boeing is also considering the acquisition of Spirit AeroSystems, the manufacturer of 737 MAX fuselages. A potential deal is anticipated later in the year but negotiations are proceeding thoughtfully due to the deal’s complexity.

Mr. West emphasized the importance of reintegrating Spirit AeroSystems with Boeing for improved quality and safety measures.

In 2005, Boeing divested Spirit AeroSystems, which currently garners revenue from Airbus, Boeing’s main competitor. Airbus has taken on some of Spirit’s operations recently as production has slowed.

Reuters contributed to this report.