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Boeing loses $425 million but plans production boost for Max

The company said Wednesday that revenue jumped 28% from a year earlier, however, beating analysts’ expectations

The logo for Boeing
The logo for Boeing appears on a screen above a trading post on the floor of the New York Stock Exchange, July 13, 2021.Richard Drew (AP)

Boeing lost $425 million in the first quarter — more than Wall Street expected — but said Wednesday that it plans to boost production of its best-selling plane, the 737 Max, later this year. Revenue rose 28% from a year earlier, as airlines scooped up new jets to meet rising travel demand, and the company stood by its forecast of producing $3 billion to $5 billion in cash flow this year.

Shares of Boeing rose 3% Wednesday. CEO David Calhoun called it “a solid first quarter.” “We continue to make real progress, steady progress, in our recovery,” he said on a call with analysts. “Challenges remain, there’s more to do, but overall we feel good about the operational and financial outlook.”

Boeing’s passenger jets have been plagued by production problems, and the quarterly loss was due largely to the cost of reworking planes to fix production flaws. It also took a write-down in the first quarter for a military tanker.

Calhoun said again that Boeing will delay deliveries of some planes that airlines were expecting for the busy summer travel season. The delays are due to unapproved fittings that a contractor, Spirit AeroSystems, installed where the tail meets the fuselage on most 737 Max jets built since 2019.

“It’s a gnarly defect,” Calhoun said when an analyst asked why it took four years to discover the flaw. The CEO said a sealant applied over fuselage joints hid the cracks.

Analysts expressed some skepticism about Boeing’s outlook while problems persist in its supply chain. Seth Seifman of JPMorgan wondered whether Boeing can increase 737 production given issues at Spirit.

“You can only go as fast as they can go, and... I don’t think anybody has had a more challenging three or four years than Spirit, other than maybe you guys,” Seifman told executives.

Calhoun replied that Boeing is confident Spirit can meet a faster schedule.

Officials said it would take a matter of days to fix planes that are not yet assembled but longer for about 225 Max jets that were finished and are now sitting in Boeing’s inventory.

Executives didn’t put a precise number on how many 737 deliveries will be delayed beyond the peak summer travel season. Calhoun said last week that 9,000 seats would be missing from airline schedules this summer, which works out to about 50 Max jets.

Despite the setback, Boeing still hopes to hit its goal of delivering 400 to 450 Max jets this year. It delivered 111 in the first quarter.

Boeing said it still expects to increase Max production. The company was building 31 a month at the start of this year and plans to raise that to 38 a month later this year and 50 a month by 2025 or 2026.

Boeing repeated earlier assurances that the fuselage issue on the Max does not affect safety and that airlines can keep using planes that are already carrying passengers.

The Arlington, Virginia, company said the loss in core operations worked out to $1.27 per share. Analysts expected the company to lose $1.07 per share, according to a FactSet survey.

The company lost money in its airliner and defense units, although less than a year ago. The defense side was dragged down by a $245 million charge to fix the KC-46A refueling tanker. Boeing’s services business was profitable.

Revenue climbed to $17.92 billion, beating analysts’ forecast of $17.52 billion.

Boeing shareholders are on the hook for a $414 million loss in the first quarter, with another $11 million loss attributed to a noncontrolling interest. Boeing lost $5 billion last year.

“It’s been a tough slog for the company, but the trends appear to be getting better,” said Jeff Windau, an analyst for Edward Jones. “We know there is demand (for planes), there is a solid order book. We should be seeing better performance from them in the second half of the year.”

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