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Boeing raises the liquidity alarm after the slowdown in production of the 737 Max imposed by the US aeronautical authorities as a consequence of the accident on January 5th. Chief Financial Officer Brian West, speaking at a conference in London, predicted the group will burn through more cash than estimated in January, between $4 billion and $4.5 billion in the first quarter. Estimates at the beginning of the year were one billion dollars. Analysts are more pessimistic and expect an outflow of at least $5 billion.
The plan to reach its goal of $10 billion in cash flow by 2025-26 will take longer, West said at a Bank of America conference. The monthly production target of 50 Max by 2025 has also been postponed, a target which on the contrary will be kept below 38 planes per month, a level reached at the end of 2023. The CFO recalled that starting from the current month, Boeing has stopped accepting fuselages from Spirit AeroSystems as parts were missing or needed repairs, another reason for the slowdown in production. “We are deliberately slowing down to get the right result,” West said at the conference. We are the ones who made the decision to limit the target of the 737 program… and we will feel the impact in the coming months.”
CFO West: «It’s difficult to make short-term forecasts»
“We are unable to make short-term predictions due to the work we are doing on the group,” West said. We will become more precise but it will take time.” Back in January, the company suspended its financial forecast for 2024 after the accident. West predicted margins at Boeing’s commercial aircraft division will be negative about 20% in the first quarter, the worst performance since late 2021.
Boeing’s crisis hits airlines
Boeing’s slowdown is starting to be felt among airlines that are asking for new planes to adapt to strong travel demand. As in the case of Ryanair CEO Michael O’Leary, who declared in a conference in Brussels that capacity next summer in Europe will be held back by delays in Boeing deliveries and engine problems affecting Airbus planes. The Irish budget airline flies with an all-Boeing fleet and has been forced to reduce some targets and destinations for this summer due to a shortage of planned planes.
Industrial reorganization
In an attempt to stem the crisis after the accidents that blocked the production of one of its most lucrative planes, the 737 Max, Boeing is also implementing a radical industrial reorganization. One of the first moves that the American manufacturer is considering is to bring its main supplier, Spirit Aerosystems, which exited in 2005 with a spin-off operation, back into Boeing’s perimeter. In this regard, West stated that Boeing will not use shares to finance a potential acquisition, valued at around 3.5 billion dollars (“We have the money for the merger”), but will use a “mix of liquidity and debt”, adding that the group’s investment grade credit rating remains a priority. At the end of 2023, the group had recorded cash flow of $4.4 billion. To raise cash, Boeing is also considering the sale of some units of the Space and Defense division.