Boeing delays 777X another year and writes off $1.2B as future costs pile up
Boeing on Wednesday disclosed a heavy first-quarter loss as it wrote off $1.2 billion related to two defense-side fixed-price aircraft projects and the impact of the war in Ukraine.
The company also announced it will push out delivery of the first giant 777X jet at least a year to 2025 — a delay that it estimates will incur a further $1.5 billion in abnormal production costs in future quarters.
Boeing said it will pause 777X production in Everett, Washington through the end of next year to avoid building up more inventory. It has already built and rolled out four flight test models and 20 production 777X jets.
Speaking on CNBC Wednesday morning, Boeing CEO Dave Calhoun said the 777X production halt is necessary to stop “producing airplanes which we then may have to rebuild and rework.”
London-based aerospace financial analyst firm Agency Partners summed up Boeing’s announcements in a note to investors as a “dreadful set of results” and wrote that the “general sense of disarray continues.”
Likewise, Rob Stallard of Vertical Research Partners
called it “another dreadful quarter from Boeing.”
“What we think will really worry investors is that we keep getting MORE bad news,” Stallard wrote.
FIXED PRICE DEFENSE CONTRACTS TAKE A HIT
The company recorded a net loss for the first quarter of $1.2 billion, or $2.06 per share.
Revenue for the quarter was $14 billion, compared to the S&P Global Intelligence consensus estimate by analysts of $15.9 billion.
Boeing’s cash on hand decreased over the quarter from $16.2 billion to $12.3 billion. As a result, its net debt ballooned from $41.9 billion at the end of 2021 to $45.4 billion at the end of March.
On the defense side of the company, Boeing wrote off $660 million for the Air Force One transport jets, the two 747-8 aircraft it is modifying in San Antonio, Texas. It blamed this on “higher supplier costs, higher costs to finalize technical requirements and schedule delays.”
It also wrote off $367 million for the T-7 Air Force trainer jet under development in St. Louis, Missouri, “primarily driven by ongoing supplier negotiations impacted by supply chain constraints, COVID-19 and inflationary pressures.”
Calhoun in a memo to employees early Wednesday reiterated those factors, tying the supply chain disruption and cost inflation to the impact of the pandemic and the war in Ukraine.