Boeing said on Wednesday it was close to receiving regulatory approval to resume deliveries of 787 jets, a move that could help reverse lackluster profits, but warned that the production ramp-up for the 737 MAX will be hampered by supply chain problems would be slowed down.
The US aerospace giant’s two most popular airliners featured prominently in its mixed earnings report, with the lack of revenue from the 787 Dreamliner again a major drag.
Stocks turned slightly higher before the session ended.
A resumption of 787 deliveries will restore a key revenue stream, but a prolonged 737 MAX ramp-up suggests Boeing won’t be delivering as many of these planes as quickly as expected.
“A lot of good things happened during the quarter,” said Chief Executive Dave Calhoun, who described the company as “close to” receiving US Air Traffic Safety Agency approval for the 787, though he declined to give a specific target date.
Calhoun reported no signs of a general slowdown in the sector, telling analysts that “this general recession thing hasn’t hit our airline industry so far.”
“Will it ever be? Maybe,” he said, while noting that air travel seemed “fundamentally prioritized to a higher slot” by consumers weary of the pandemic restrictions.
– engine damage –
However, Calhoun warned that the company has no timeline to ramp up production of the MAX from the current 31 to 38 per month, calling the “limited” engine capacity a “constraint” on the company’s prospects.
“Some investment and capacity expansion is needed to allow engine suppliers to keep up with what I believe will continue to be robust demand,” Calhoun said.
Brian West, Boeing’s chief financial officer, told analysts they would expect MAX deliveries in the “low 400s” in 2022, after previously estimating around 500.
For the quarter ended June 30, Boeing reported a 67 percent decline in quarterly profits to $193 million, while revenue fell 1.9 percent to $16.7 billion.
The company missed analyst estimates for revenue and earnings per share, but share prices initially rose after the report as Boeing confirmed it still expects cash flow positive in 2022.
On the 787, the company worked with the Federal Aviation Administration to resolve a number of manufacturing issues uncovered in 2020 and since.
Boeing levied a $3.5 billion fee for additional rework costs for the 787 in the fourth quarter of 2021. In April, the company said it also expected an additional $2 billion in “anomalous costs” for the 787.
At the end of June, Boeing had 120 Dreamliner aircraft in stock and was producing the jet “at very low prices,” the company said in a filing.
On Wednesday, the company said it was working with US aviation security officials on “final actions” to resume 787 deliveries.
– China Haze –
The increased regulatory scrutiny of the 787 and other Boeing planes follows two crashes of the 737 MAX in 2018 and 2019, which led to a protracted worldwide grounding of the plane.
But the MAX has since returned to service, allowing Boeing to resume deliveries and announce significant new orders, including at the Farnborough Airshow earlier this month.
But Boeing still has 290 MAX planes in its inventory. A key wildcard remains when deliveries resume in China, where the MAX has still not returned to service.
“While we expect 737 MAX deliveries to our customers in China to resume in 2022, risk remains regarding the timing and speed of those deliveries, pending final regulatory approvals,” Boeing said in a statement Securities filing on Wednesday.
Despite recent orders at Farnborough, Boeing’s order backlog in the pipeline lags behind that of arch-rival Airbus, but Calhoun told CNBC on Wednesday he wasn’t worried about the difference.
“We don’t need to fill that gap,” Calhoun said, adding that the airline industry “is supply constrained as far as I can see.”
Boeing’s job is to “deliver against our backlog,” he said. “My job is to make sure I have a large enough backlog to keep increasing my rate, keep production stable, and keep our customers happy at every step.”
Shares fell during the earnings call but later recovered to close at $156.09, up 0.1 percent.
#Boeing #sees #progress #warns #supply #chain
