Boeing faces cash burn and delayed deliveries in 2024 amid production challenges

Boeing's financial woes are expected to worsen in 2024, as the US planemaker expects to lose cash rather than generate revenue, worsened by flat deliveries in the second quarter. Brian West, the company's CFO, announced at the Wolfe Research Global Transportation and Industrials Conference on Thursday.

Boeing's year-end outlook has deteriorated significantly, with West reducing the full-year free cash flow prediction to negative, in sharp contrast to the previously anticipated positive cash generation in the low single-digit billions. This bleak forecast comes after delivery delays and production issues caused a 7.6 per cent decline in Boeing's stock, which closed at $172.21.

Production concerns and delayed exports to China have worsened the company's woes, undermining an already modest forecast for 2024. "We were expecting this year to be below our financial expectations for the rating, and this is even worse," said Ben Tsocanos, airlines director at S&P Global Ratings.

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Boeing's aircraft manufacturing has slowed dramatically, owing to greater scrutiny from regulators and lawmakers following a January incident in which a door stopper blew off an Alaska Airlines plane in midair. West verified a Reuters claim that recent delays in plane deliveries to China were due to a regulatory examination of cockpit voice recorder batteries by China's Civil Aviation Administration.

West also highlighted that commercial aircraft deliveries will not rise in the second quarter compared to the first three months of the year. Customers have become "frustrated and disappointed" because of production delays and delivery concerns, according to West. He also highlighted internal gains while emphasizing the need for faster growth.

Production disruptions and supply delays are projected to result in a second-quarter cash burn comparable to, if not worse than, the $3.9 billion recorded in the first quarter. This forecast contrasts with West's April announcement, in which he projected a considerable, although better, usage of free cash in the second quarter. According to LSEG statistics, analysts had previously estimated a $1.9 billion cash consumption for the time.

Boeing's stock has dropped by roughly 32 per cent year to date. Due to assembly line slowdowns to handle outstanding work, 737 MAX airliner output plummeted to single digits in April, considerably below the US Federal Aviation Administration's cap of 38 jets per month.

The January 5 incident involving an Alaska Airlines airplane prompted US aviation regulators to impose production limits until Boeing resolved its safety issues. Following Dave Calhoun's decision to retire at the end of the year, Boeing is reforming its manufacturing procedures and looking for a new CEO.

Furthermore, the US Justice Department will determine by July 7 whether to prosecute Boeing for violating an agreement that exempted it from prosecution for the 2018 and 2019 plane crashes. The FAA has also set a May 30 deadline for Boeing to submit a 90-day report addressing systemic quality-control deficiencies, with FAA Administrator Mike Whitaker noting Boeing's "long road" to resolving safety concerns.

Boeing is also in talks with Spirit AeroSystems, a supplier of 737 MAX fuselages. While West hinted that a deal may be completed in the second quarter, he emphasized the project's complexity and scale, cautioning against hurrying the process. Spirit AeroSystems, which Boeing spun off in 2005, now supplies rival Airbus, complicating purchase talks.

(With inputs from Reuters)