Boeing, the American aerospace giant, has reported its first quarterly revenue drop in seven quarters, signaling ongoing challenges in its operations. The company reported $16.57 billion in quarterly revenue, down from $17.92 billion in Q1 last year. However, Boeing beat market expectations of $16.23 billion.
The downturn comes in the wake of a production slowdown due to a mid-air incident in January, which compelled the company to reassess its manufacturing processes and prioritize safety measures.
Boeing CFO Brian West has cautioned analysts about a sizeable cash burn in the second quarter, underscoring the company’s financial strain due to production disruptions and ongoing operational challenges. However, he expects free cash usage to improve from the $3.93 billion cash burn in the first quarter.
Regulatory scrutiny
Following the January incident involving the new 737 MAX 9 jet, Boeing has been facing regulatory scrutiny. The U.S. Federal Aviation Administration (FAA) imposed production caps on the new jet and mandated quality control enhancements. With a 90-day deadline to devise a comprehensive quality assurance plan, Boeing remains focused on restoring confidence in its manufacturing standards and regulatory compliance. Boeing’s CEO reiterated that production rates will rise until the system is under control.
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Delay in financial and production goals
Analysts warned that the slow pace of deliveries could impact Boeing’s financial and production goals. Last month, Boeing’s CFO stated that the company will need more time to reach its goals for an annual cash flow of about $10 billion by 2025 or 2026. This goal is crucial as the company works to accelerate its recovery from 2018 and 2019’s MAX jet incidents.
In quarter one of 2024, Boeing delivered 13 twin-aisle 787 Dreamliner jets. It expects production to return to five per month later this year. Supply chain issues involving airline seats and cooling parts have impacted the slowdown so far this year. The company also delivered 67 737s, a 41 percent decline compared to last year.
Boeing’s commercial business margins declined to -24.6 percent from -9.2 percent due to paying airlines for the temporary grounding of MAX 9 aircraft.
Earlier, Moody’s cut Boeing’s credit rating to the bottom of investment grade. The agency expects challenges in the company’s commercial business to persist through 2026 when it has $8 billion in debt due.
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