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Boeing burned through nearly $4 billion of cash in the first quarter after the company slowed production lines and paid $443 million in compensation to aircraft customers following a mid-air accident on one of its planes.
The U.S. plane maker has been in crisis since a door panel on an Alaska Airlines Boeing 737 Max plane exploded in January, putting it in the crosshairs of government investigators and forcing it to reduce deliveries as it works to improve the quality of its Improve aircraft manufacturing. Chief Executive Officer Dave Calhoun announced his retirement at the end of the year.
The company reported a first-quarter net loss of $355 million on Wednesday. Free cash outflow of $3.9 billion was nearly five times the outflow of $786 million in the same period last year, but was slightly lower than the $4 billion to $4.5 billion reported the company warned in March.
The results “reflect the immediate actions we took to slow 737 production to drive quality improvements,” Calhoun said.
“In the short term, yes, we are in a difficult time,” he said in a letter to staff on Wednesday. “Reduced deliveries may be difficult for our customers and our finances. But safety and quality must and will come first.”
As in January, the company did not provide financial guidance for the year, but Chief Financial Officer Brian West said the second quarter would still see “further significant cash burn.”
However, the plane maker reiterated its goal, set in November 2022, to generate $10 billion in free cash flow by 2025 or 2026.
“This will take us six months,” Calhoun said in an interview with CNBC, noting that while the company would still meet the cash flow target, the timing would be pushed back.
The plane maker is building fewer than 38 Max planes per month, fewer than before the accident, meaning the company is receiving less money.
The company said it is working to improve processes, including training, inspection and the way it handles “traveled work,” where jets move through the production line and are fixed later in the assembly process, at the 737 factory in Renton, Washington.
Boeing is also trying to stabilize its supply chain. In March, the company stopped accepting fuselages from Wichita, Kansas-based supplier Spirit AeroSystems that did not meet design and manufacturing standards.
Boeing said in March that it was considering buying Spirit, which it spun off two decades ago, but West said Wednesday that it was working out details on pricing, financing and divestiture work that Spirit does for others.
“We believe in the strategic logic of a deal, but we will take the time to get it right,” he said.
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Boeing is facing investigations by aviation regulators and the US Department of Justice. Although no one was killed in the January accident, the explosive loss of cabin pressure injured some on board and was reminiscent of two previous fatal accidents that led to the global grounding of the 737 Max for nearly two years.
The Alaska Airlines accident led to the temporary grounding of the 737 Max 9 aircraft and forced Boeing to make payments to customers United Airlines and Alaska Airlines for disrupting their operations.
An audit of Boeing by the US Federal Aviation Administration found “multiple instances” in which the company allegedly failed to meet manufacturing and quality control requirements. Regulators have given the company until the end of May to submit an improvement plan. A preliminary report from the National Transportation Safety Board found that the 737 Max 9 involved in the Alaska Airlines accident was missing four screws that were supposed to secure the door panel to the fuselage.
Boeing said Wednesday it would “implement a comprehensive action plan” to address the audit’s findings. Calhoun’s letter to employees noted a 500 percent increase in reports to Boeing’s internal safety hotline compared to the previous year.
But whistleblowers, aviation safety experts and now the Boeing engineers union are accusing the company of retaliating against employees who have raised safety concerns.
The Society of Professional Engineering Employees in Aerospace said Tuesday that it had filed a complaint with the National Labor Relations Board after two engineers received negative performance reviews after they insisted on managers’ objections that Boeing should review past work.
“Boeing can tell Congress and the media all they want about the fact that retaliation is strictly prohibited,” said Rich Plunkett, director of strategic development at SPEEA. “But our union regularly fights against retaliation.”
Boeing shares fell 1.4 percent to $166.81 in midday trading.
Baird analyst Peter Arment said the stock represents “a buying opportunity.” “The kitchen sink quarter was not as bad as feared, with progress expected in production, shipments, etc [free cash flow] in the coming quarters combined with a change in management.”