Boeing reports first revenue drop in seven quarters as deliveries slow By Reuters

By Abhijith Ganapavaram and Allison Lampert

(Reuters) – Boeing on Wednesday reported its first quarterly revenue decline in seven quarters, but the U.S. planemaker beat analyst expectations that were lowered after a mid-flight door plug explosion in January led to to slow down production of its best-selling aircraft.

Following the report, Boeing (NYSE CEO Dave Calhoun told CNBC that a deal to acquire its key supplier Spirit AeroSystems (NYSE ) is more than likely to be reached during the second quarter.

Issues that need to be resolved include pricing and talks with Spirit customer Airbus, Boeing's main rival. But Calhoun told analysts that Boeing can move forward without complete clarity from Airbus.

“We are not hostages,” said Calhoun, who will leave at the end of the year.

Quarterly revenue was $16.57 billion, up from $17.92 billion a year earlier but beating expectations of $16.23 billion. Shares of Boeing and Spirit Aero fell about 3% in early afternoon trading.

Boeing Chief Financial Officer Brian West told analysts that cash burn in the second quarter would be “considerable,” although he expected free cash use to improve from the $3.93 billion cash burn in the first. quarter. That was less than the $4.49 billion analysts expected following the Jan. 5 crash involving a nearly new 737 MAX 9 plane.

“Well, it could have been worse. While the losses and cash outflow are not as bad as feared, the company clearly still faces some serious challenges,” Vertical Research Partners analyst Robert Stallard said in a note.

In the afternoon, Moody's (NYSE:) downgraded Boeing's credit rating to the lowest level of investment grade. The agency expects the headwinds surrounding the company's commercial aircraft to persist at least through 2026, when Boeing has $8 billion in debt coming due.

Multiple legal actions resulted from the Alaska Airlines crash. Boeing recorded an earnings charge of $443 million, net of insurance recoveries, according to a company filing.

Since the accident, the United States Federal Aviation Administration (FAA) imposed a limit on the production of single-aisle 737 MAX aircraft and gave Boeing 90 days from February 28 to develop a comprehensive plan to improve flight control. quality.

Reuters reported this month that production of Boeing's 737 MAX had fallen sharply as U.S. regulators tightened factory controls. Calhoun said production will remain sporadic during the second quarter as the company devises a plan to better monitor its manufacturing system. He said production rates would not increase until the system is under control.

“So 90 days is not like 'wave a magic flag and everything will be great,' and you guys can spend 38 to 40” jets a month, Calhoun said. Boeing has hired independent quality experts, whom Calhoun expects will remain for several years.

While Boeing has not named a successor, Calhoun told CNBC he believes commercial aircraft chief Stephanie Pope has the potential to lead the company.

Analysts have warned that the slow pace of deliveries could delay Boeing's financial and production goals. Boeing's chief financial officer said last month that the company needs more time to reach its 2022 goal of annual cash flow of about $10 billion by 2025 or 2026.

That goal is considered key as Boeing works to accelerate its recovery from an earlier crisis after two MAX planes crashed in 2018 and 2019.

Boeing delivered 13 twin-aisle 787 Dreamliner aircraft in the quarter. Production is expected to return to five per month by the end of this year. Calhoun attributed the slowdown to supply chain issues related to airplane seats and parts used in refrigeration.

However, with production limited at Boeing and Airbus, demand remains strong, although the European aircraft maker has increased its lead in the narrowbody market.

Calhoun said Boeing would have “largely delivered” its 737 and 787 inventory by the end of the year, bringing in much-needed cash. He added that his defense business, which has been losing money, “will progress toward more historic levels of performance.”

Operating margins in Boeing's defense business recovered to 2.2% in the quarter from a negative 3.2% a year ago, although it still lost $222 million on certain fixed-price development programs.

Boeing delivered 67 737s in the quarter through March, down 41% from last year. Aircraft manufacturers receive most of the cash upon delivery of the aircraft.

Combined with compensation Boeing had to pay airlines for the temporary grounding of MAX 9 planes, margins in its commercial aircraft business deteriorated to negative 24.6% from negative 9.2%.

Adjusted headline loss per share narrowed to $1.13, beating expectations for a per-share loss of $1.76, according to LSEG data.