Boeing Chief Financial Officer Brian West estimates the current safety crisis will cost the company billions of dollars in the first quarter.
At a Bank of America conference on March 20, West said Boeing is working to control safety issues with the 737. He predicted that Boeing could lose $4 billion to $4.5 billion in cash in the first quarter, higher than expected in January.
US regulators currently allow Boeing to produce only 39 737s a month. However, West said Boeing's actual production rate is lower than that. "We are deliberately slowing down, to make sure everything is safe. The impact will be felt in the next few months," he said at a conference yesterday.
The production cuts and delivery delays are hitting Boeing’s free cash flow, meaning it will take longer to hit its 2022 financial target — 2025 or 2026 at the latest, with cash flow of around $10 billion.
“It will definitely take time. But we think what we are doing now will be beneficial in the long term,” he explained.
A Boeing 737 Max at the Farnborough Air Show (UK) in 2022. Photo: Reuters
West said its commercial aircraft profit margin could be “negative 20%” in the first quarter due to compensation for late deliveries to customers. That figure will improve this year, but overall it will still be negative in 2024.
Boeing shares fell 2.3% on March 20. The stock has lost 25% since the beginning of the year.
Boeing is under mounting pressure after a series of quality and safety issues. On January 5, an Alaska Airlines 737 MAX 9 made an emergency landing after a door seal came loose at 16,000 feet. Three days later, United Airlines discovered loose screws on a series of 737 MAX 9s during a preliminary inspection.
The US Federal Aviation Administration (FAA) has ordered 171 737 MAX 9s in the US to be grounded for inspection and maintenance. In late January, Alaska Airlines announced that an inspection following a door seal incident had found loose screws on several 737 MAX 9s. United Airlines canceled 200 flights using the aircraft.
The incident has left Boeing under suspicion from US authorities and angered airlines, who have had to cut routes and buy more planes to meet demand. Michael O'Leary, CEO of Ryanair (one of Boeing's key customers), said he would meet with company executives this week to discuss the issue, Reuters reported.
Ha Thu (according to Reuters)
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