By Bryan Corliss
July 26, 2023, (c) Leeham News — The Boeing Co. on Wednesday reported a quarterly loss of $99 million, due in part to spending tied to production rate increases in its Commercial Airplanes division.
Boeing said that rates on its 737 line in Renton are increasing to 38 a month. The 787 program has increased rates to four a month, with a plan to increase that to five a month by the end of this year.
Boeing is working with suppliers to get rates up to 50 a month on the 737 line sometime in 2025-26. CEO Dave Calhoun said during Wednesday earning call that demand is there for even higher rates.
“I’d love to get to 60 and the market is there for it,” he said. “The industry is short of airplanes by a relatively large margin.”
However, Boeing and its suppliers need to stabilize production at currently projected rates before considering going beyond what’s already been announced, the CEO said. “We’re going to work hard on stability.”
For this year, Boeing said it expects to deliver between 400 and 450 737s, along with 70 to 80 787s.
Commercial revenues increased 41% during the quarter, to $8.8 billion. However, the unit took a loss of $383 million, which the company attributed to “abnormal costs and period expenses, including research and development” that was related to the production rate increase.
Boeing’s Commercial division delivered 138 aircraft during the quarter, which was up 12% from the same period last year. It announced a net of 460 firm orders for the quarter, including the 220-jet order from Air India and the Ryan Air deal for 150 737s, plus options on up to 150 737-10s.
Demand from airlines “remains very strong,” Calhoun said. Boeing has a number of challenges, but is making progress, he added. “The supply chain notably is the most significant but it’s steadily getting better.”
Supply chain issues also are affecting Boeing’s profitable Global Services unit, the CEO said. “Everything they do,” is affected by parts shortages.
“My prediction is it’s going to be a while,” Calhoun said. “Everybody’s fighting for the next part.”
Given those challenges, it will be a few months before Boeing is consistently delivering planes at the new rate, CFO Brian West said. Once deliveries have stabilized, Boeing will announce its next rate break, he said. Suppliers already have a master schedule that outlines the company’s expected path toward 50/month.
The quick resolution of last month’s strike at Spirit AeroSystems means it will have no disruption on Boeing’s deliveries, West said. Rework of the incorrectly installed stabilizers will be completed this quarter and could push back a few deliveries into the fourth quarter, he said.
The Chinese government has allowed airlines there to put their 737 MAX jets into service and those airlines have put about 90% of the planes back in service, the Boeing executives said.
Boeing still has some 220 completed 737 MAX jets in its inventory, of which 85 currently are earmarked for Chinese customers, West said.
Calhoun noted that Boeing had — after consulting with Chinese airlines — remarketed some of the completed 737s from its backlog. He said he is optimistic that China’s government will allow deliveries to restart, so that the remaining 85 can be delivered. In the meantime, Boeing will a “free-trade beacon” urging both the United States and China toward closer trade ties, he said.
West said the company expects to have all 220 remaining 737 MAX jets delivered by the end of 2024.
Boeing plans to resume production of its long-stalled 777-X before the end of this year, the executives said.
That shouldn’t be read as a sign U.S. and European regulators are on the verge of certifying the new widebody, they said.
But Calhoun said that with demand for aircraft being so strong, Boeing wants to “simply get ahead of the production curve.”
LNA reported in June that Boeing had completed more than 90% of the test flights it plans for gathering data for regulators, and that the plane had “performed very, very well.” Boeing is seeking an amended type certificate for the 777-X, which will have new engines, wings and a cockpit compared to previous versions. The program was launched in 2013.
Calhoun said Boeing is “intent on proving” the viability of the trans-sonic truss brace technology it is developing with NASA. “I do think it’ll see service,” he said.
The CEO said it is possible that a plane based on the X-66A design could enter commercial service with current-generation jet engines, but given that Boeing is looking to develop a new aircraft that’s 20% to 30% more efficient, “we’d prefer to have a bigger fan diameter,” he added, “and maybe even an open rotor someday.”
“If they behave like they did in the wind tunnel, we’re in a pretty good place,” Calhoun said.
Boeing reported its Defense, Space and Security unit lost $527 million for the quarter, compared to a profit of $71 million in the second quarter last year. (We looked at problems facing BDS earlier this week.)
The company said the Defense unit was impacted by “labor instability and supply chain disruption” involving some programs. Delays on the Commercial Crew space program, the T-7A Red Hawk trainer and MQ-25 drone added $514 million in losses.
West said the company was dealing with some BDS production lines that “almost went dark” during the pandemic. Now Boeing and its suppliers both are trying to find the right people with the right skills to do very complicated work.
Boeing’s Defense business still is constrained by major fixed-price contracts it agreed to with the government, Calhoun said. “We’re going to have to live within this envelope, he said. “We do see progress. It does take time”
Boeing also noted that it had paid down its total debt by $3.1 billion, leaving it with $53.2 billion still on its books.