Boeing on Wednesday reported a loss of $1.6 billion in the third quarter, its fifth consecutive quarterly loss and the largest since a $3.3 billion loss in the same period last year.
"We knew 2023 would be a bumpy ride," Boeing CEO Dave Calhoun told Wall Street analysts. "But overall, we're making progress in our recovery."
Boeing slashed the expected number of Maxes to be delivered this year but maintained its cash flow targets and its plan to raise production rates longer-term.
A big loss on the Air Force One presidential jet program added to the expected hit to earnings from recent problems with the 737 Max.
The commercial airplane division lost $678 million from operations in the quarter, where the red ink flowed from reduced revenue from fewer 737 Max jet deliveries and added costs as mechanics conducted required inspections and a rework of the latest manufacturing quality defect.
Boeing said it now expects to deliver between 375 and 400 Maxes by year-end, lowering the projected range by between 25 and 50 aircraft.
The operating loss was worse in the defense and space division, at $924 million.
Boeing wrote off $482 million on the Air Force One program. Costs have climbed at its San Antonio, Texas, facility for systems installation on the two 747-8s that are slated to be delivered for use by the U.S. president in 2027.
That brings the total charges on the Air Force One program to $2.4 billion.
Boeing wrote off an additional $315 million on a new problem: increased costs on an unidentified satellite contract.
And then there was another $136 million write-off on a couple of smaller defense programs, including the MQ-25 aerial refueling drone being developed to operate off the Navy's aircraft carriers.
Boeing had written off $68 million on the MQ-25 just last quarter, but the charges keep coming.
The total written off this quarter was not far off $1 billion.
In an earnings call with Wall Street analysts, Boeing Chief Financial Officer Brian West said losses in the fourth quarter should be lower, "but it's still going to be negative."
Amounting to $2.70 per share, the third quarter loss was higher than expected on Wall Street. According to S&P Global Market Intelligence data, financial analysts' estimates had projected losses averaging $1.4 billion, or $2.19 per share.
Boeing's share price sank Wednesday, closing at $177.70, down $4.66 or 2.6%.
There was a cash outflow in the third quarter of more than $300 million. Yet West said 2023 free cash flow — cash generated minus cash spent on plant and equipment — will still end up within the target range of between $3 billion and $5 billion, though now "more toward the low end."
And though Max deliveries were low last quarter and will remain low this month, West projected that Max production will stabilize at 38 jets per month by year-end with deliveries picking up in November and December.
Interviewed on CNBC, Calhoun said of 737 Max production: "We'll get back to our full rate by the time we get to the end of the year."
The Boeing CEO opened the earnings conference call by saying he is "saddened to see the horrific attacks on Israel and the escalating conflict in the region."
Yet he projected that brutal conflagration plus the war in Ukraine will inevitably boost Boeing's defense business through the sale of bombs and missiles.
"In light of what's going on in the world ... the forecast for our weapons business ... is getting more and more robust every day," he said on CNBC.
He expressed confidence that the military spending bill President Joe Biden has sent to Congress that includes billions of dollars for weapons to support Ukraine, Israel and Taiwan will pass.
"I'm cautiously optimistic," Calhoun said on CNBC. "I think we'll get support from Congress."
Has Boeing lost a step? CEO says no.
The latest 737 Max quality defect discovered during the quarter was misdrilled holes in the aft pressure bulkhead built by Spirit AeroSystems in Wichita, Kan. The part is a domelike structure that seals the back end of the pressurized passenger cabin.
This month, Spirit fired its CEO Tom Gentile and replaced him with board member and former Boeing executive Pat Shanahan.
Soon after, Spirit and Boeing finalized a new investment and pricing agreement that will see Boeing pump into Spirit an extra $455 million over the next two years to shore up the troubled supplier.
Calhoun on CNBC raved about Shanahan's appointment, saying he will help get Spirit's work on building the Max fuselages back on track. Shanahan once ran the 737 assembly plant in Renton and is known as a hands-on fixer.
"Pat is an operator's operator that knows exactly how this fuselage moves into the Boeing factories," Calhoun said on CNBC. "In the reports from my team, he's on the floor literally every day. And that's a great sign for all of us."
Calhoun added that Boeing has more than 100 employees working inside Spirit's factories to assist with its recovery.
"We're seeing increased stability and quality performance within our own factories. But we're working to get the supply chain caught up to the same standards," he said.
The company said it expects to get the Max quality defects fixed and out of the way so that it can stabilize the production rate at 38 jets per month by year-end.
On the 787 Dreamliner program in South Carolina, Boeing reiterated plans to raise production from four to five jets per month by year-end.
In a message sent to all Boeing employees Wednesday morning, Calhoun said he'd "heard those outside our company wondering if we've lost a step."
"I view it as quite the opposite," he wrote to employees.
Calhoun said the quality problems have surfaced not out of sloppiness but because of stricter internal oversight and a newfound commitment to transparency.
"These are not newly created defects," Calhoun told the employees. "Thanks to the culture we're building, we have identified non-conformances from the past that we now have the rigor to find and fix once and for all."
Boeing's long-term goal is to bring its production back to normal by late 2025 or 2026 and to ramp up by then to 50 Maxes and 10 Dreamliners per month, producing $10 billion in cash flow.
To do that, Boeing must clear the big inventory of parked Maxes and 787s that need to be repaired before delivery.
West said there are now about 250 Maxes parked and awaiting rework, about 30 more than before the latest defect was discovered in August.
Boeing has said it wanted to have all those cleared out by the end of next year but West said that goal is now "more likely to slip into 2025."
Of those parked Maxes, 85 were built for Chinese airlines. Almost three years after the Max returned to service elsewhere around the world, China has still not opened up to Max deliveries.
However, Calhoun said on the call that he's encouraged by signs of progress with China.
Boeing also has 75 Dreamliners still undelivered and awaiting repair of the fuselage joins. West reiterated previous comments that those should all be cleared by the end of 2024.
Boeing's third-quarter revenue was $18.1 billion, lower than the second quarter but still up 13% compared to a year ago.
In this quarter of 2022, Boeing posted $2.8 billion in write-offs, including $1.2 billion on the KC-46 tanker, $766 million on Air Force One and $351 million on the MQ-25.
With the latter two programs still bleeding cash a year later, West was at least able to report that tanker production is stabilizing with "signs of progress and improved productivity."
With the cash outflow in the quarter, Boeing's net debt rose by $400 million to $38.9 billion.
"We have more work to do," Calhoun said.
