By Valerie Insinna and Abhijith Ganapavaram
(Reuters) – Boeing Co has “much to prove” to regain the confidence of regulators and customers after a mid-air cabin-panel blowout of a 737 MAX aircraft, CEO Dave Calhoun said on Wednesday, adding that the planemaker will “go slow” as it faces a “serious challenge.”
As expected, Calhoun did not offer a financial or delivery forecast for 2024, stating that the company must focus on delivering quality airplanes.
The planemaker, however, reported a smaller quarterly loss and better-than-expected revenue and free cash flow, though investors are more likely to focus on the company’s expectations as it navigates the current crisis.
“We will not rush the system and we will take our time to do it right,” Calhoun said in a letter to employees, while voicing confidence in Boeing’s recovery.
The accident involving an Alaska Airlines-operated MAX 9 jet earlier this month has turned into a full-blown safety and reputational crisis for the iconic planemaker, potentially leading to slower jet production and a loss of more narrowbody market share to Airbus.
Boeing said on Wednesday that 737 aircraft were being produced at a previously outlined rate of 38/month, a level that it plans to maintain after the U.S. Federal Aviation Administration (FAA) barred the company from lifting production, while increasing its oversight.
The 787 production rate was at five per month, Boeing said, adding that it had also resumed 777X production during the fourth quarter.
Increasing production of 737 MAX jets is crucial to Boeing’s recovery from a separate safety crisis arising from two fatal crashes in 2018 and 2019 and the subsequent aerospace slump that followed due to the onset of the COVID-19 pandemic.
“We’ve taken significant steps over the last several years to strengthen our safety and quality processes, but this (Alaska Air) accident makes it absolutely clear that we have more work to do,” Calhoun said, amid mounting pressure on the company’s top brass.
He also pointed to an announcement by Boeing earlier this month that it would add further quality inspections for the 737 MAX and deploy a team to supplier Spirit AeroSystems, which makes and installs the plug door involved in the incident.
For the fourth quarter, Boeing reported an adjusted per-share loss of 47 cents, compared with analysts’ estimates of a loss of 78 cents, as per LSEG data.
The company’s ailing defense business logged $139 million in losses on fixed-price development programs.
Revenue rose 10% to $22.02 billion, compared with expectations of about $21.1 billion.
In its earnings release, Boeing did not provide an update to its 2025-26 cash flow and MAX production forecast amid lingering industry doubts on whether the planemaker will be able to achieve those targets after the FAA’s unprecedented decision.
During its investor day in November 2022, Boeing projected free cash flow of about $10 billion by 2025-2026 and 737 production of 50 per month.
But it reported 2023 free cash flow of $4.43 billion, achieving its target of $3 billion to $5 billion for the year. Shares of the company were little changed in premarket trading.
The planemaker, long a symbol of America’s manufacturing prowess, has yet to consistently report positive cash flows as it faced difficulties in raising production in the last two years due to a fractured supply chain and nagging quality issues.
(Reporting by Abhijith Ganapavaram in Bengaluru and Valerie Insinna in Washington, DC; Editing by Anil D’Silva)
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