Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Boeing Co (BA, Financial) has made significant progress in improving safety and quality management systems, with key performance indicators showing positive trends.
- The company has successfully transferred the fuselage inspection process to Wichita, leading to improved quality and reduced flow times.
- Boeing Co (BA) received type inspection authorization for the 777-9 and began certification flight testing with FAA personnel on board.
- Global Services continues to deliver strong results, with a robust backlog and high operating margins.
- The planned acquisition of Spirit AeroSystems is expected to enhance supply chain stability and unify safety and quality management systems.
Negative Points
- Boeing Co (BA) reported a core loss per share of $2.90, reflecting lower commercial delivery volume and significant losses on fixed-price defense development programs.
- Free cash flow was a usage of $4.3 billion in the quarter, impacted by lower commercial deliveries and unfavorable working capital timing.
- The defense segment experienced a $1 billion loss on fixed-price development contracts, with operating margins at minus 15.2%.
- Inventory levels remain high, with approximately 90 737-8s built prior to 2023 still in inventory, primarily for customers in China and India.
- The company faces ongoing challenges with supply chain constraints, particularly in the production of the 787, impacting delivery schedules.
Q & A Highlights
Q: Can you talk about how you think of managing inventory build on both ends, given the production process or ramp that you're on right now?
A: The inventory build is right in front of us as we make this investment for stability. On the 737, delivery rates in April and May were in the mid-teens, June saw 35, and July will be similar. Progress is evident, and we expect it to continue, leading to inventory unwinding. For the 787, we had nine deliveries in Q2 and six in July. Despite supply chain constraints, we have a game plan to reach five per month by year-end, which will also help liquidate inventory.
Q: How does the third line in Renton help with the bottleneck in fuselage deliveries from Spirit?
A: Spirit has shown steady improvement, and we believe we can fill the third line and reach 38 per month by year-end. The third line also provides flexibility to handle unforeseen issues, helping to stabilize production.
Q: Can you provide an update on the IAM labor negotiations and any operating contingencies in case of a strike?
A: We are not planning on a strike and it's too early to call out a gap analysis. We are committed to treating our employees well and making investments in training and development. The express intent is to avoid a strike.
Q: Can you comment on the abnormality of advanced payments and categorize where you are on advances?
A: We have both excesses being applied and customers withholding PDPs until delivery schedules stabilize. The $1 billion pullback in advances in the quarter reflects this. As deliveries become more predictable, this will unwind.
Q: Can you provide more color on the certification timing for the 737-7 and 737-10?
A: The milestone is to complete the engineering work and pass certification tests. We expect to complete the engineering well before the end of the year, followed by test certification. First half of 2025 sounds realistic for certification.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
