Boeing sees Q1 hit from airline payments
NEW YORK, United States -- Boeing expects a tough first quarter financially as it slows operations amid heightened regulatory scrutiny and compensates airlines for the recent 737 MAX grounding, a top executive said Tuesday.
Chief Financial Officer Brian West reiterated that the aviation company supported intensified oversight from the Federal Aviation Administration after a near-catastrophic Alaska Airlines incident on January 5 that resulted in an emergency landing of a 737 MAX 9.
"Right now, we're in the position where we have to do things like pause the line," West told a financial conference.
"And that will just slow the final assembly and slow output," he continued, stressing "we are perfectly comfortable" with the shift.
After the Alaska Airlines emergency, the FAA grounded more than 170 MAX 9 planes for about three weeks with the same configuration as the plane involved in the incident, in which a door panel on the fuselage blew out. No one was injured.
Last week, FAA Administrator Michael Whitaker pledged closer scrutiny of Boeing at a congressional hearing, calling the January 5 event "unacceptable."
Boeing expects a "cash usage" in the first quarter, said West.
Boeing delivered 27 commercial jets in January, a relatively low number, the company disclosed on its website. Plane deliveries are closely tracked as a proxy for revenues.
West pointed to the first quarter of 2023, when Boeing reported a loss of $414 million, as something of a benchmark on what to expect in the coming quarter given seasonal weakness.
However, he implied this year's performance would also suffer from the financial hit for compensating airlines for thousands of flights canceled after the FAA grounding.
Additionally, Boeing will not get the same financial lift from a Pentagon award in the 2023 period, West said.
The FAA has said it will freeze Boeing's 737 MAX output at 38 per month and not permit increased volumes until it demonstrates improved quality control.
West suggested the "go slow" approach meant volumes would be below 38 per month early in the year, but that the company expects to reach that level later in 2024, although "it will be dictated by the regulator."
Boeing is midway into a six-week audit overseen by the FAA. West said a team of 26 inspectors are reviewing MAX operations at Boeing's Renton, Washington factory and at supplier Spirit AeroSystems in Wichita, Kansas, where the MAX fuselages are built.
Shares of Boeing fell 2.2 percent shortly after midday.