(Bloomberg) — Boeing Co. has scrapped a plan to revive cash this year, saying it will experience another significant outflow in the current quarter as the embattled planemaker battles on multiple fronts to restore production and ramp up deliveries.
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Second-quarter cash burn will be similar or worse than in the first three months of the year, when Boeing earned nearly $4 billion, Chief Financial Officer Brian West said Thursday at a Wolfe Research conference. The full year will now be “a use versus cash flow generation,” he said.
While West warned just a few weeks ago that Boeing would experience a “messy” second quarter with significant cash outflows, the latest forecasts paint a bleaker picture of the manufacturer’s recovery prospects. The company’s problems have been exacerbated by China’s request for additional certification for some aircraft parts. That in turn has halted deliveries to one of the world’s most important aviation markets, leading to a deteriorating financial profile.
Boeing fell as much as 6.7% in U.S. trading, the biggest intraday decline in nearly four months. The American aircraft manufacturer is in the midst of a deep crisis after a near-catastrophe in January involving the 737 Max 9 aircraft in flight. The aircraft maker has come under fire from regulators, lawmakers and airlines as the incident exposed declining quality and safety at its factories and led to the departure of its chairman, CEO and head of its commercial unit.
West said in April that the company would generate full-year free cash flow “in the low single-digit billions” while ramping up deliveries again. He had also forecast cash burn to “improve sequentially” in the second quarter.
Because China’s Civil Aviation Administration sought additional documents related to the certification of batteries in cockpit voice recorders, the company has been unable to hand over aircraft to the country, West said. Deliveries in the period will be close to the numbers achieved in the first three months, he said.
China setback
The CAAC action is a setback for Boeing, which had only just resumed deliveries of new planes to China after a five-year hiatus. Resuming 737 Max deliveries to China is critical to generating cash and reducing the stock of already-built aircraft that were grounded nearly five years ago and the Covid-19 pandemic that followed.
“Our operating and financial performance will improve and accelerate as we move through the third and fourth quarters, and that will be the benefit of all the work we’re doing now,” West said. “I understand that everyone would like it to go faster, but it is a long-term thing and we have to be disciplined.”
The company still expects to achieve certification for its 777X widebody model in 2025, West said. Some customers are concerned that that model – already five years late – will be further delayed as Boeing grapples with its many problems. The company is also experiencing parts supply issues for its 787 model, including with heat exchangers and seats, although the problems will not hurt the widebody model’s overall delivery schedule, West said.
West said he is still optimistic that Boeing can “get something done” with Spirit AeroSystems Holdings Inc. in the second quarter. to reintegrate its main supplier. While “nothing is off the table” in terms of financing the deal, the company is keen to maintain its investment-grade credit rating, he said.
Money burning
Boeing’s cash burn in the first quarter prompted Moody’s Ratings to downgrade the company’s credit rating to the brink of junk. The aircraft manufacturer then raised $10 billion from bond sales.
The company will present a 90-day plan on May 30 to address deficiencies in its manufacturing processes and safety culture, according to the Federal Aviation Administration. The plan will outline steps the company plans to take to resolve quality control issues at its factories after a door plug blew off a nearly new 737 Max in January.
West said the 90-day plan is “not an end point,” and that Boeing looks forward to continued cooperation with the aviation regulator.
“We view this as a long-term investment that is good for the company, good for our customers and good for the industry,” west of the road ahead.
–With help from Allyson Versprille.
(Updates with additional comments from the CFO)
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