Boeing Reports Loss as Air Force One Work Drags -- Update
April 28 2021 - 10:34AM
Dow Jones News
By Doug Cameron and Andrew Tangel
Boeing Co. reported its seventh consecutive quarterly loss but
said it is at an inflection point as production and delivery of new
jetliners hinge on vaccination rates and trade relations between
the U.S. and China.
The aerospace giant resumed deliveries of 737 MAX and 787
Dreamliners during the quarter, but continues to be dogged by
quality problems. The company booked a charge on its work replacing
the Air Force One presidential jets because of problems with a
supplier.
The patchy recovery of global air travel remains the biggest
issue for Boeing and its huge supply chain, with domestic markets
in the U.S. and some parts of Asia recovering to pre-pandemic
levels while Europe and long-haul travel struggle.
Boeing shares fell in early trade, recently down more than
3%.
Aircraft deliveries are starting to increase, and Boeing left
its jet production plans unchanged. Chief Executive David Calhoun
said Wednesday that near-term increases hinge on relations with
China, its single largest customer. China has yet to follow the
U.S. and other regulators in recertifying the MAX.
Without a sizable order from Chinese customers, Mr. Calhoun
predicted "steady, stable" production rates. "Taking them down -- I
don't think so, " Mr. Calhoun said in an interview on CNBC. "Taking
them up, and at what rate -- that's where this matters."
The limited resumption of 737 MAX and 787 Dreamliner jet
deliveries against a background of quality issues contributed to
sales of $15.2 billion in the first quarter, down 10% from a year
earlier. Boeing reported a loss of $561 million compared with a
$641 million deficit a year earlier.
Boeing took a $318 million charge on its work converting two
747-8 jets to serve as the future Air Force One, citing
pandemic-related delays as well as a dispute with a supplier. The
company is contracted to deliver two converted 747-8 jumbo jets by
the end of 2024, but has been forced to switch suppliers for some
of the interior work on the planes.
The two planes once destined for a now-defunct Russian airline
are being converted by Boeing with new interiors, communications
systems and defensive systems. The $3.9 billion contract was
awarded after a long standoff over the price with former President
Donald Trump.
Boeing took a charge last year on the program and then became
involved in a dispute with GDC Technics LLC, which was working on
some of the interior refits. The firm filed for chapter 11
bankruptcy protection last week after Boeing canceled its contract
citing performance issues, and subsequently countersued the plane
maker, according to court records.
It is the latest drag from a defense unit that Boeing is relying
on to carry it through to a recovery in commercial airline
traffic.
Boeing has been grappling with commercial-airline production
issues in recent months. It halted 787 deliveries for five months
to resolve manufacturing problems. Earlier this month, it told
airlines to ground 106 MAX jets to resolve electrical issues
stemming from a change in its assembly process.
The company said the recovery in air-travel demand was gaining
traction but remained uneven. As sales of new aircraft have picked
up with the rise of Covid-19 vaccinations, the company has said a
U.S. trade deal with China would boost orders for new aircraft.
"Challenges remain, and we will continue to monitor the global
trade environment as well as Covid-19 trends across the globe,"
said Chief Executive David Calhoun in a message to staff
Wednesday.
The per-share loss of 92 cents in the quarter ended March 31 was
just ahead of the 98-cent consensus among analysts polled by
FactSet. The company burned through $3.4 billion of cash in the
quarter.
Boeing shares were down 1% in premarket trading.
Write to Doug Cameron at doug.cameron@wsj.com and Andrew Tangel
at Andrew.Tangel@wsj.com
(END) Dow Jones Newswires
April 28, 2021 11:19 ET (15:19 GMT)
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