Dive Brief:
- Boeing expects to burn through between $4 billion to 4.5 billion in cash this quarter to fix its production line as it faces scrutiny over a series of safety mishaps this year, starting with a midair door plug blowout on one of its Alaska Airlines planes on Jan. 5, CFO Brian West said at a Bank of America conference in London Wednesday.
- The company confirmed that it’s slowing production of 737 Max units, which West said will be under 38 per month, and then ramping up toward the end of the year. Production numbers above 38 aircraft monthly will need sign-off from the Federal Aviation Administration, he said.
- Since the January incident, Boeing has acknowledged that it needs to improve its record on safety and compliance, West said. “For years, we've prioritized the movement of the airplane through the factory over getting it done right, and that's got to change,” he said.
Dive Insight:
Boeing is facing increasing pressure from regulators and customers that shows no sign of letting up as several safety mishaps and production process gaps were identified in the wake of the January Alaska Airlines event. In the most recent safety incident last week, 50 people were hurt when a Boeing 787 operated by LATAM Airlines dropped abruptly during a flight from Sydney to Auckland.
An FAA audit released in early March alleges “multiple instances” where Boeing and supplier Spirit AeroSystems failed to comply with manufacturing control requirements. The FAA, The New York Times reported, conducted 89 product audits, with the company passing 56 of the audits and failing 33 of them. A total of 97 instances of alleged noncompliance were identified.
West’s commentary stood in contrast to remarks he delivered in February, in which he expressed optimism that a production rate of 38 aircraft per month could be achieved by the second half of the year. At that time, he also noted that Boeing would accelerate production of components by its suppliers, per its original schedule.
On Wednesday, West provided more details on the cost of the plan to fix the problems. He also emphasized that improving Boeing’s supply chain was key to ensuring safety and compliance with quality control standards. In particular, he said the company would reduce “traveled work,” or instances where some components of a product are completed outside of a production line’s typical sequence of events. Traveled work has long been an issue on the Boeing production line, as missing parts would need to be installed after an aircraft was completed, sometimes resulting in the need for disassembly and rework, according to a 2022 Seattle Times report.
Margins for Boeing’s commercial aircraft business will be “negative 20%” for the first quarter due to the fallout of the Jan. 5 event, West said. Despite the margin pressure, the company retains sufficient reserves in cash and debt to complete an acquisition of Spirit, he said. The companies confirmed merger discussions were underway earlier this month.
In February, an FAA expert panel report highlighted organizational challenges at Boeing, including a disconnect between senior management and others in the company on safety culture, the implementation of which it called “inadequate and confusing.” On March 12, The New York Times reported that prominent Boeing whistleblower John Barnett was found dead in Charleston, South Carolina, with what appeared to be a self-inflicted gunshot wound.
