The crisis surrounding the 737 Max medium-haul jet is costing Boeing dearly. In the first quarter alone, the aircraft manufacturer burned through almost $4 billion in cash. The US company had to reduce deliveries of its most important aircraft family after a near-miss and production defects. Compensation to airlines alone for a ban on take-off of the 737-9 Max model lasting several weeks after the incident amounted to $443 million.
CEO Dave Calhoun spoke on Wednesday of a “short-term” difficult phase for the company. The lower delivery figures could be difficult for the group’s finances and its customers. “But safety and quality must and will be above all else.”
Despite the loss and the high outflow of funds, things were not as bad for Boeing as feared, at least financially. At $3.9 billion, the company used up half a billion less cash in the first quarter than analysts had expected – and not as much as CFO Brian West had recently predicted. At $355 million, the loss was 16 percent lower than a year earlier and was only around half as high as experts estimated.
Production and control processes under the microscope
Boeing has been in a permanent crisis since the crashes of two 737 Max jets that killed 346 people more than five years ago. A more than 20-month ban on takeoffs for the aircraft in the series and problems with other models have thrown the manufacturer far behind its European rival Airbus since March 2019.
When a fuselage part finally broke out of an almost new 737-9 Max on an Alaska Airlines flight at the beginning of January 2024, the US Federal Aviation Administration (FAA) took action. Initially, machines were no longer allowed to start until a technical inspection was carried out. The authority also takes a close look at the production and control processes.
Above all, Boeing is currently no longer allowed to expand production of the entire 737 series to more than 38 aircraft per month. The previously planned increase to around 50 737 aircraft per month is therefore not possible for the time being. Airlines such as the low-cost airlines Southwest and Ryanair therefore had to cut their flight schedules.
This means that Boeing is falling even further behind Airbus: The European manufacturer has recently been building around 50 of its medium-haul jets from the A320neo family every month. And Airbus boss Guillaume Faury wants to expand production of the series to a record level of 75 machines per month by 2026.
Production of the 737 series scaled back
Boeing, on the other hand, reduced production of the 737 series in the first quarter even more than required by regulators. Across all models, the manufacturer only delivered 83 passenger and cargo jets – 36 percent fewer than a year earlier.
There are also problems with the planned expansion of production of the long-haul model 787 Dreamliner – due to bottlenecks in some components. Boeing used to purchase heat exchangers for the model from Russia. After the Russian attack on Ukraine, the contract was awarded to a new supplier that was not expanding its capacity quickly enough, Calhoun said in a conference call. In addition, some airlines would have to wait longer for airplane seats. Now Boeing wants to expand production to ten 787s per month by 2026 – and initially to five aircraft per month by the end of this year.
Sales in the commercial aircraft division fell by 31 percent in the last quarter. Boeing owed the fact that group-wide revenue fell by only eight percent to just under $16.6 billion to growth in the defense, space and service business.
Boeing boss Calhoun called for patience on Wednesday: “We are taking the time necessary to strengthen our systems to ensure quality and safety.” In March, the manager surprisingly announced his retirement at the end of the year. The previous head of the commercial aircraft division, Stan Deal, even handed over his position with immediate effect to Stephanie Pope, who had only been promoted to head of the group’s day-to-day business at the beginning of January.