By Karl Sinclair
Jan. 28, 2025, © Leeham News: Boeing’s CEO Kelly Ortberg, now five months into his job, painted an encouraging picture of the company’s path to recovery in an appearance on the financial news network CNBC before the 2024 full-year earnings call.
Kelly Ortberg, CEO of Boeing. Credit: Boeing.
Ortberg said there is a path for Boeing Commercial Airplanes to win approval from the Federal Aviation Administration (FAA) to return this year to a production rate of 38/mo for the 737 MAX. This is the rate before the Jan. 5, 2024, accident involving an Alaska Airlines 10-week-old MAX 9 in which a door plug blew off the airplane at 14,000 ft after take off from Portland (OR). The accident was traced to a production failure by Boeing. Nobody died, and the injuries were minor. The plane safely returned to Portland for an emergency landing.
Since then, production has trickled along at 20 or less per month. Returning to a rate of 38 and growing beyond is critical to Boeing’s financial recovery.
Ortberg told CNBC this path appears to be on track finally.
Deliveries climbing as inventory clears
Ortberg predicted a delivery rate in the upper 30s on the 737 MAX program for January. Most of this will be “flushing through inventory,” as he put it.
He also expects FAA approval to move beyond the rate of 38/mo by the second half of 2025.
Boeing is planning to be at 38/mo for the balance of the year, with an incremental increase of 5/mo, every six months thereafter.
As noted by Avalon, this is against historical trends and is highly optimistic. Especially given the current state of the supply chain.
He reiterated that the balance sheet was solid for 2025. Yet he expected the first half to be a cash-burn period, which would be reversed in the second half.
RBC Capital Markets estimates a burn-off of ($3.5bn) for 2025.
Boeing has a debt repayment schedule of $4.581bn for 2025. Combined with ~$3bn in debt servicing costs, financial activities will cost the company at least ($7.5bn) in cash.
Ortberg once again echoed comments concerning fixed-price defense contracts made by CEOs Jim McNerney and Dennis Muilenburg. He re-affirmed Boeing’s position that they would not enter into any further contracts of that nature, a position announced by former CEO David Calhoun, which was at the forefront of BDS losses.
Remaining inventory
On the earnings call, CFO Brian West detailed that BCA’s inventory of 737 and 787 aircraft were as follows:
- 55 737 MAX 8 aircraft, the majority for customers in China and India, built before 2023;
- 35 737 MAX 7 and 10 aircraft, testing ongoing with certification expected later in the year; and
- 25 787 Dreamliners, built before 2023 that still require re-work.
Much of the blame for the poor financial performance was laid at the feet of the IAM strike.
The current MAX production is in the mid-20s, while the 787 program produces at 5/mo.
Ortberg and West underlined the “half-trillion dollar backlog” in their opening comments.
Boeing is also in the advanced stages of trimming some subsidiaries. While not termed a structural re-design of the corporation, that would infer a sell-off of BDS or BGS, Ortberg has completed his portfolio review and expects any changes to happen in the next six months to a year.
A more in-depth financial analysis of the Boeing 2024 FY and 10-K filing will follow. An LNA annual update on the Boeing Deferred Production costs will follow on January 30.
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