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Boeing withheld its usual financial guidance for the coming year and vowed to focus on the safety and quality of its operations, as the US plane maker tries to stem the fallout from a mid-air blowout on one of its 737 Max 9 jets earlier this month.
Chief executive Dave Calhoun wrote in a note to employees on Wednesday that “now is not the time” to share financial or operational objectives ahead of his first address to investors since part of a fuselage blew out during an Alaska Airlines flight on January 5.
Calhoun, whose management of the aerospace and defence giant is under scrutiny in the wake of the accident, issued a mea culpa after the results, adding his focus was now on earning back the confidence of Boeing’s customers, the regulators and the flying public.
“We caused the problem, and we understand that,” he said. “Whatever conclusions are reached, Boeing is accountable for what happened . . . We simply must be better.”
The Max issue was overshadowing Boeing’s latest quarterly earnings results, which were better than expected.
The company did not provide any estimate for the financial hit from the incident and the subsequent grounding of potentially affected jets. It said the majority of the 737 Max 9 aircraft that had been grounded in the immediate aftermath of the accident were back in operation.
Boeing also did not disclose the impact of the growth limit on its 737 Max production rate recently imposed by the Federal Aviation Administration, the US aviation regulator. Increasing production of the Max, the company’s biggest-selling commercial model, is critical to its recovery following the Covid-19 pandemic and two deadly crashes of the Max 8 variant.
Calhoun said Boeing’s production of 737 Max planes would remain at its current rate of 38 per month until the regulator was “satisfied” with the company’s quality management oversight.
The crisis has dealt a blow to Boeing’s management and sharpened scrutiny of its manufacturing and quality control processes, as well as those of key supplier Spirit AeroSystems. Spirit, which was spun out of Boeing in 2005, builds the Max fuselages and the door panel that blew out on the Alaska Airlines aircraft.
“The subject of how we interact with all of our suppliers will be a subject that we will be working on for quite a long time,” Calhoun told CNBC earlier on Wednesday. Boeing outsources much of its supply chain to thousands of suppliers, including Spirit.
“On the subject of vertical integration — and did [the outsourcing] go too far — yeah, it probably did,” he said.
Calhoun declined to comment on reports that bolts, that should have been attached to the Alaska jet’s door panel to hold it in place, had never been installed.
“That’s the critical question,” he said, while stressing he did not want to pre-empt the conclusions from the investigation being led by the National Transportation Safety Board.
However, he added he was “convinced that we’ve got this [door] plug completely under control”.
Calhoun also said the Max 9 accident was a hit to Boeing’s airline customers, but insisted the company had not lost their confidence. He told CNBC he would work his “tail off . . . to satisfy [United Airlines chief executive] Scott Kirby”, who has said his airline is reconsidering its order of Max 10s, the largest Max variant, which still needs to be certified by regulators.
Boeing declined to offer new certification timelines for the Max 10 and the smallest model, the Max 7.
The company earlier this week withdrew a request for a safety exemption on an engine anti-ice system it had sought in order to expedite the certification of the Max 7. Brian West, Boeing’s chief financial officer, on Wednesday said an “engineering solution” could be completed within a year.
The company reported a net loss of $30mn on revenue of $22bn in the three months ended December 31, which were both ahead of analysts’ forecasts.
Boeing said it generated $4.4bn of free cash flow in 2023, falling within the $3bn to $5bn range it had forecast. The company said it was “still confident” in the goals it had previously outlined for 2025-2026 but added “it may take longer in that window than originally anticipated”. It set a target of generating about $10bn for that period at an investor day in November 2022.
Robert Stallard, analyst at Vertical Research Partners, said the fourth quarter had “ironically . . . ended up being a decent quarter for Boeing particularly for cash flow”.
“The full ramifications of the latest Max safety issues have yet to be felt, and we see it as telling that Boeing has not provided any update on its outlook or guidance in this morning’s release,” said Stallard in a note, adding that Boeing’s “immediate fate is arguably in the hands of the FAA”.
Boeing shares were up more than 6 per cent per cent in midday trading on Wednesday. Spirit’s shares shot up almost 10 per cent.
The results came as shareholders filed class-action suit against Boeing alleging the company prioritised profit over safety. The lawsuit filed in the Alexandria, Virginia, federal court covers shareholders from October 23 2019 to January 24 2024, and is led by Rhode Island general treasurer James Diossa.
