Blighted by industrial action, safety and supply chain issues, Boeing has reported a net loss of $6.17bn in its third quarter 2024 results published on October 23, 2024. This is a marked decline from its net loss of $1.44bn reported in the previous quarter as well as its $1.64bn in the same quarter last year. Basic loss per share in the period was $9.97, compared to a $2.70 loss per share last year.
All eyes are on the manufacturer’s earnings report this quarter as the company tries to scale the mounting hurdles the year has presented from regulatory oversight and investigations, as well as a 38 monthly production output cap on its 737 aircraft, with the Flight 1282 incident at the start of the year acting as a catalyst. To further complicate matters, Boeing machinist workers based in Portland and Seattle have been on strike for over a month. The union members will vote today on Boeing’s newly proposed 35% wage increase – having originally rejected the company’s initial 25% wage deal offer.
The third quarter results also mark new CEO Kelly Ortberg’s first earnings report. In his message on the third quarter results, he called for fundamental change in the company’s culture to stablise the business and “build a new future for Boeing”.
Ortberg continued in his message: “It will take time to return Boeing to its former legacy but, with the right focus and culture, we can be an iconic company and aerospace leader once again.”
Throughout the earnings call, Ortberg emphasised the need to rejuvenate the company’s culture. “My mission here is pretty straightforward: Turn this big ship in the right direction,” he said in the call. Ortberg said improving culture would be a continuous process, not a simple milestone.
Stabilising the business, Ortberg said, starts with ending the IAM strike, which he was “very hopeful” of an end in sight with production restarting soon. That said, he noted the difficult task of restarting factories but that the company had a safety and quality plan in place ready for implementation. “As you know, this is a plan that we have reviewed with the FAA and will be part of the criteria we will use to measure stability of our production system which is necessary to gain authority to increase 737 rates,” said Ortberg.
He further clarified that there was no change in its commitment to acquire Spirit AeroSystems, which would play a “major” role in stabilising its business. Management added that it had seen “pretty good improvement in the overall quality of the fuselages” coming in from Spirit, prior to the Boeing strike.
In addition, when asked about exiting contracts or programmes that impacted its profitability – particularly in its defence programmes – Ortberg said: “That’s not a viable option for us. I don’t think we can – even if we wanted to. I don’t think we can walk away from these contracts. These are core customers… we’ve got long term commitments to them.”
A significant problem for the company was that it is “saddled with too much debt”, the new leader added. As of the third quarter’s end, Boeing’s consolidated debt was $57.7bn. The airframe manufacturer had recently announced via a stock filing that it may seek to raise up to $25bn over three years to boost its liquidity as its corporate credit rating risks falling into junk territory. Boeing also a new $10bn supplemental credit agreement with a group of banks.
“Another big rock to stabilise the company is managing our balance sheet to best support retaining our investment grade credit rating,” added Ortberg.
In its earnings call, Boeing CFO Brian West said the company is in “active engagement” with rating agencies. “It’s a constructive dialogue,” West said. “They help inform the plan we have to address the balance sheet. From a timing perspective, we’ve everything necessary to be in a position to raise capital and we’re monitoring events closely.”
While noting the “eroded” trust in the company, as well as the “serious lapses” in its performance, Ortberg did note a significant silver lining: a backlog worth roughly half-a-trillion dollars. The backlog for its commercial business is over 5,400 airplanes valued at $428bn. The commercial segment booked 49 net orders in the quarter. Consolidated backlog is valued at $510.5bn.
For the duration of the third quarter, Boeing generated $17.8bn in revenues, down from $18.1bn in the same quarter last year. Loss from operations totalled $5.8bn, widening from last year’s $808 million. It reported a negative operating margin of 32.3%, compared to a negative margin of 4.5% in third quarter 2023.
The company’s operating cash flow swung to a negative $1.35bn, compared to its positive $22 million in 2023. Boeing said this reflects the impact of the ongoing strikes. Its free cash flow was a negative near $2bn versus a negative $310 million in 2023.
The company’s commercial airplanes business’ revenues were down 5% to $7.4bn and an operating margin of negative 54%, compared to a negative 8.6% in the same financial period a year prior. Boeing said this reflects previously announced pre-tax charges of $3bn on the 777X and the 767 programmes as well as the IAM union strikes, as well as higher period expenses.
The company’s consolidated total costs and expenses for the quarter were $21.3bn, up from $16.9bn last year. Year-to-date, total costs and expenses are $51.7bn.
The commercial aircraft segment’s loss from operations totalled $4bn versus $678 million in the previous year. It also delivered 116 aircraft in the quarter, up from 105 aircraft in the same quarter last year. However, year-to-date, it has delivered a total of 291 aircraft, compared to 371 in the same period of 2023. For the deliveries so far this year, 229 of the aircraft delivered consisted of 737s. 36 of its deliveries consisted of 787s.
The 787 programme is currently producing at four aircraft per month and Boeing maintained it would return to five per month by the end of the year.
Ortberg hinted that the company would look to develop a new commercial airliner but gave no impression that this was imminent given Boeing’s litany of more pressing issues. He said: “Boeing is an airplane company and at the right time in the future we need to develop a new airplane. But we have a lot of work to do before then.”
As part of its original wage deal, the company committed to building its next new aircraft in Washington state. In a message urging workers to accept the initial deal, Boeing Commercial Aircraft CEO Stephanie Pope said: “Boeing’s roots are here in Washington… as part of the contract, our team in the Puget Sound region will build Boeing’s next airplane.”
Ortberg said the company is looking to bring 737 production rates up to 38 per month by next year before seeking to up the production cap with the FAA at some point in the year. However, he highlighted the return to work was the most pressing issue before it moves on to a ramp up.
He added later in the call that the first production cap increase would be “the hardest”. He added: “We just can't be overly aggressive in how we're forecasting that, because anything in aerospace, the first time you do it, it's hard, and this will be the first time.” Following the first increase, though, he anticipated further sequential rate increases to be “easier”.
West said that prior to the strike, the company had “been making good progress on stabilising production and preparing for 38 per month by year”.
As of September 30, 2024, the company’s total current assets were valued at $109.4bn – including $9.96bn in cash and cash equivalents. Total assets were valued at $137.7bn. Total liabilities and equity was $137.7bn as of the quarter’s end.
As with the previous quarter, Boeing did not provide any full year or fourth quarter guidance. However, West did state in the earnings call that net free cash flow for the fourth quarter “could look similar to the second quarter” depending on return to work from striking staff and production pace. Management said it expected to build momentum and more stable production rates towards the end of next year. West added that free cash flow next year will be “significantly better than 2024”. However, the company did confirm that its full year free cash flow for full year 2025 would still remain negative.