Supplier Defect Affects Boeing’s 737 Deliveries
Boeing Co. warns of lower-than-expected deliveries of its 737 jetliner due to a supplier issue affecting production.
Supplier Glitch Impacts Delivery Targets
Boeing acknowledges that a manufacturing glitch in cabin pressure bulkheads will likely result in 737 jet deliveries for 2023 falling towards the lower end of the 400 to 450 aircraft target range. The company’s CFO, Brian West, discussed this matter at an investor conference.
Challenges Faced by Spirit AeroSystems
Spirit AeroSystems Holdings Inc., the supplier responsible for the defect, faces challenges in addressing this issue. Boeing’s chief financial officer elaborated on the extensive inspections and repairs required.
Long-Term Financial Goals Remain Unchanged
Despite these obstacles, Boeing maintains confidence in achieving its long-term financial objectives. The company is committed to generating $10 billion in annual free cash flow by the mid-2020s and expects to meet its free cash flow goals for the current year.
Market Reaction to Boeing’s Update
Boeing’s shares experienced a 0.3% decline following the announcement, while Spirit AeroSystems’ shares dropped by 3.3%. Boeing’s stock had seen a 14% increase earlier in the year.
Quality Concerns Persist
The quality issue concerning 737 bulkheads appears to have been ongoing, potentially dating back to 2017. The extensive inspections and repairs needed for over 1,000 jets have added complexity to the situation.
Cash Flow Outlook
Boeing anticipates the delivery of around 70 737 jets during the third quarter, with the bulkhead issue affecting this period’s figures. Despite these challenges, Boeing foresees generating between $3 billion and $5 billion in free cash flow for the year, with a slightly negative cash flow expected in the third quarter.
Boeing in the Recovery Phase
Boeing characterizes its current position as being in the midst of a recovery phase, which CFO Brian West describes as “lumpy, not linear.”