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Tribune News Service
Tribune News Service
Dominic Gates

Pitching investors, Boeing projects short-term pain, then stability

Boeing on Wednesday lowered Wall Street expectations on jet deliveries and the cash Boeing will generate in the next couple of years while offering hope of a full recovery in three to four years.

In an attempt to steady the expectations of Wall Street, Boeing CEO Dave Calhoun on Wednesday projected that recovery from the company’s challenges won’t come until 2025 or 2026 — and that only then Boeing will generate the full gusher of cash it’s been projecting but that has been slow in materializing.

And Calhoun said Boeing will not deliver its next new commercial jet until the middle of the 2030s, implying that no such plane will be launched until late this decade. Anything sooner, he said, is “not going to happen.”

Calhoun delivered an energetic and emotional presentation before an audience of analysts and investors gathered Wednesday for an Investor Day conference at Boeing’s jet delivery center in Seattle.

He recounted the “existential” threats the company has had to overcome in the past three years: the impact of the two deadly 737 Max crashes and the extended grounding of that airplane; the collapse of air travel with the worldwide COVID pandemic; and the long halt to 787 Dreamliner deliveries over quality defects.

“I feel like we’ve mitigated these existential moments we’ve had to face,” Calhoun said.

When Boeing finally achieves production stability “sometime in 2025 or 2026,” Calhoun said free cash flow — the cash left after paying operating costs and expenditure on equipment — will then reach about $10 billion per year.

“While that goal of ‘$10 billion and stable’ isn’t all that sexy, it feels good to us,” Calhoun said in closing. “That’s exactly where we want to be … And it’ll be amazing.”

It was left to Boeing Chief Financial Officer Brian West, speaking after his boss, to lay out some of the nearer-term pain before that promised recovery.

West said free cash flow next year will be between $3 billion and $5 billion, considerably below Wall Street expectations, which before the most recent quarterly results projected a result in the range from $5 billion to $8 billion.

And he said Boeing’s defense and space unit, which in the third quarter wrote off a massive $2.8 billion on troubled fixed price contracts — most substantially on the KC-46 tanker and Air Force One programs — will continue to be a heavy cash drain in 2023, on the order of $0.5 billion to $1 billion.

West said that the plan for full recovery in the 2025/26 timeframe targets the commercial jet factories ramped up then to building about 50 Maxes per month in Renton, about 10 mid-size widebody 787s per month in North Charleston, South Carolina, and about four large widebody 777/777X jets per month in Everett.

Those figures serve to highlight the starkly lower current jet delivery rates, which have varied widely month to month.

Stan Deal, CEO of the Commercial Airplanes unit, revealed another bump in the road Wednesday when he told the audience that quality problems hit 737 Max production last month.

Deal said Boeing delivered only 23 Maxes in October, down from 36 the previous month and the lowest monthly figure since February.

“At the last moment, our quality management system caught two defects in the fuselage,” Deal explained. He said the defects were discovered at Spirit AeroSystems, which makes the 737 Max fuselages in Wichta, Kan.

Deal added that, despite this new glitch, Boeing will recover its deliveries to around 30 Maxes per month at the end of the year.

Deal also revealed one more delay: Boeing now expects the largest and last 737 Max model, the Max 10, will not be certified until the end of 2023 or early 2024, he said.

The smallest model, the Max 7, is expected to be certified early next year.

Certification of both planes depends upon Congress giving Boeing an extension to the deadline beyond which the manufacturer would have to substantially upgrade the Max flight control systems to meet new safety standards.

A week ago, Boeing reported a $3.3 billion net loss in the third quarter due to the huge defense-side write-offs.

After that shock, Boeing’s leadership on Wednesday seemed intent on convincing investors to be patient.

Setting lower, more realistic financial targets for the next couple of years will reduce the chances of another shocking quarterly failure to meet Wall Street expectations, which invariably tanks the stock price.

The promise is that recovery will come — eventually, several years away but still in sight.

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