Boeing $5.5 Billion 787 Tab Overshadows Rare Cash Flow Gain

Boeing Co. shares dropped as the planemaker recorded $5.5 billion in total charges and costs to cover higher factory and customer expenses for the 787 Dreamliner.

The rising toll for halted deliveries of the carbon-fiber 787 has wiped away any near-term profit for the marquee widebody jet. The charges also overshadowed some rare good news for Boeing.

The aviation titan generated cash for the first time since early 2019: $494 million in free cash flow for the fourth quarter, Boeing said as it reported earnings Wednesday. That’s earlier than the cash recovery that executives had forecast for this year. Wall Street had expected an outflow of about $1 billion.

Boeing has also hiked output of its cash-cow 737, to twenty-six of the narrow-bodies a month from nineteen in October, Chief Executive Officer Dave Calhoun said in a note to employees. The planemaker has burned through more than $31 billion during a nearly three-year-long slump marked by the Max’s grounding, the Covid-19 pandemic and a spate of quality lapses.

“None of us like charges,” Calhoun said in an interview on CNBC. “It’s a big one and it reflects our reality with the delays, the rework process we’ve been involved with and the time it’ll take to work the way through the process.”

The 787 program’s profits have been wiped out as Boeing pays airlines for service they’ve lost because of delivery disruptions. The company hasn’t handed over any of the plane since June as it addresses structural imperfections on the roughly 100 aircraft in its system.

The Chicago-based company narrowed its fourth-quarter loss to $7.69 a share, hit by the 787 costs. Revenue fell to $14.79 billion, while analysts projected $16.7 billion, according to the average of estimates compiled by Bloomberg.

The manufacturer lowered its total debt by $4.3 billion to $58.1 billion as it prepaid a term loan and repaid maturing debt. Cash and investments in marketable securities fell by $3.8 billion to $16.2 billion.

Boeing shares fell 1.6% to $200.79 at 9:58 a.m. in New York, logging the biggest decline on the Dow Jones Industrial Average. The company’s shares gained 1.4% this year through Tuesday, while the industrials dropped 5.6%.

The company declined to provide financial guidance for 2022, a contrast with suppliers such as Raytheon Technologies Corp. and General Electric Co., which offered forecasts when they reported earnings. Investors will be looking for more details on the 787 program, progress in speeding up 737 Max production and the swelling inventory of undelivered jets.

Boeing has stashed around 350 of its 737 Max jets, 110 Dreamliners and twenty-five of the delayed 777X around its factories or in arid parking lots, Ken Herbert, an analyst at RBC Capital Markets, estimated before Boeing’s report. Clearing more of those jets from storage should help the company replenish its cash reserves and pay down debt.

The company recorded several 787-related charges and costs in the fourth-quarter after determining that resuming deliveries and clearing its inventory would take longer than expected. They included a $3.5 billion pretax, noncash accounting charge to cover compensation to Dreamliner customers.

The company doubled so-called abnormal costs of estimated spending on Dreamliner inspection and repairs to $2 billion and signaled that the work will extend through the end of next year.

Boeing said it is in detailed discussions with the U.S. Federal Aviation Administration over the actions necessary to resume deliveries but didn’t project when that might happen.

“Here we go again. Just as we saw with the 737 Max, Boeing is now racking up massive charges on the 787 with no firm end in sight, and its fate in the hands of the FAA,” analyst Rob Stallard of Vertical Research Partners wrote in a note to clients. The uncertainty over the jet “leaves Boeing looking a far riskier aerospace play than other higher quality names in the space.”

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