By Rajesh Kumar Singh and Abhijith Ganapavaram
- Boeing Co on Wednesday warned the pace of improvements in its operational and financial performance next year will not as "significant" as previously anticipated after unexpectedly reporting a deeper loss in the third quarter.
"Our path to recovery is taking a bit longer than expected, driven by the challenging macro environment," Chief Financial Officer Brian West said on an earnings call.
The comments came after a $2.8 billion charge on its Air Force One, refueling tanker program and other military contracts led to a wider loss in the third quarter.
The company also cut estimates for 737 MAX deliveries this year as it wrestles with supply-chain disruptions, particularly delays in delays in jet engine deliveries.
Boeing's shares were down 7.2% at $136.11 in afternoon trade.
The U.S. planemaker said supply constraints are not expected to get "much better" in the near-term and will persist through next year.
The Virginia-based planemaker is trying to emerge from overlapping crises - the pandemic and the grounding of its best-selling model after fatal crashes, which have left it with a pile of debt.
However, a run-up in costs in its defense contracts along with persistent shortages of parts and labor, and regulatory hurdles has made it tougher to shore up its fortunes.
In the quarter through September, the company reported a $2.8 billion charge on its Air Force One and refueling tanker program, among others.
The latest writedown came a day after Reuters reported Boeing has appointed a senior troubleshooter Steve Parker to help turn around loss-making programs in its defense unit.
Rising cost pressures over the last few months have hampered fixed-price contracts for U.S. aerospace and defense firms, prompting an industry body to ask the U.S. Congress for inflationary relief.
Since these contracts tend to have fixed prices, Boeing is required to absorb cost increases. Agency Partners estimates the company's various fixed price defense contracts have already resulted in of $8.8 billion of charges.
"Every quarter, one hopes that the program specific bad news has come to an end, but then we get another installment – maybe this is It? Probably not," analysts at Agency Partners said in a note.
Meanwhile, demand for commercial planes remains strong. On Wednesday, Alaska Airlines said it will buy 52 737 MAX aircraft for delivery between 2024 and 2027.
SUPPLY CONSTRAINTS
However, tight supplies have made it harder for Boeing to capitalize on that demand. It further cut estimates for MAX deliveries this year. It now expects to deliver 375 planes this year, lower than an earlier target of "low 400s."
The company singled out delays in jet engine deliveries as the primary constraint in stabilizing and increasing production rates for 737 jets. It expects the aircraft's monthly delivery trend to remain in the low 30s next year.
It called supply chain "a key watch item" for the production and deliveries of 787 jets as well.
Boeing also faces a late December deadline for the Federal Aviation Administration (FAA) to certify the MAX 7 and MAX 10 under existing rules.
After that date, all planes must have modern cockpit alerting systems to be certified by the FAA, which would mean significant delays for the new MAX aircrafts' deployment unless Congress grants a waiver to extend the deadline.
Chief Executive Dave Calhoun said he is confident the planemaker will get an extension from the U.S. Congress of a key deadline to get the planes certified.
Boeing retained its forecast of generating cash this year after reporting a free cash flow of $2.9 billion in the September quarter, higher than $1.02 billion expected by analysts in a Refinitiv survey.
Adjusted loss per share in the third quarter widened to $6.18 from $0.60 a year ago. Analysts expected the company to report a profit of 7 cents a share.
Boeing has now fallen short of Wall Street earnings estimates for a fifth quarter in a row.
