Key Takeaways
- Boeing Co. CFO Brian West forecast the troubled plane maker would burn through $4 billion to $4.5 billion in the first quarter as it slows production and deliveries amid a federal safety investigation.
- Boeing’s commercial aviation unit is expected to post first-quarter profit margins of approximately negative 20%, according to West.
- Boeing shares have lost a quarter of their value since Jan. 5, when a 737-9 MAX operated by Alaska Airlines lost part of its fuselage midflight.
Boeing Co.’s (BA) chief financial officer on Wednesday said the company would spend significantly more cash in the first quarter than expected as it seeks to revive its reputation during a federal investigation of its safety standards.
Brian West told attendees of a Bank of America conference in London that he expected cash outflow to be between $4 billion and $4.5 billion in the first quarter, more than the company had previously forecast. He said that difference was unlikely to be made up for in the rest of the year, putting full-year free cash flow in the low-single-digit billions.
The higher outflows, West said, will delay the company’s goal of achieving annual cash flow of $10 billion sometime in 2025 or 2026.
West also said he expects Boeing’s commercial unit to report first-quarter operating margins of approximately negative 20%. Margins would improve throughout the year, he said, but would likely remain negative for the full year.
Boeing had decided to constrain 737 MAX production to fewer than 38 planes a month, West said, “and we’ll feel the impact of that over the next several months.”
The Federal Aviation Administration (FAA) in January barred Boeing from expanding production of the 737 MAX amid an investigation of its safety practices following an incident Jan. 5 in which a Boeing 737-9 MAX operated by Alaska Airlines lost part of its fuselage shortly after takeoff.
On the topic of Boeing’s possible acquisition of supplier Spirit AeroSystems Holdings Inc. (SPR), which was spun off from Boeing in 2005, West said both companies felt the acquisition would be “what’s best for safety and for quality for the aerospace industry.” He also insisted that any acquisition would be funded by cash and debt, not equity.
Boeing shares were up 2.4% at $185.52 as of 1:51 p.m. ET Wednesday, but they have lost more than 26% of their value since the start of the year. Spirit AeroSystems shares rose 6.7%.