Boeing posts massive charge for 787 Dreamliner problems, sending losses soaring
Boeing took nearly $4 billion in charges related to problems it had with its 787 Dreamliner, causing losses to soar for the third straight year.
The company had already been hit with the problems surrounding the 737 Max, which was grounded for 20 months starting in 2019 following two fatal crashes. Demand then plunged for new aircraft because of massive airline losses caused by the pandemic.
Boeing has essentially not been able to deliver the widebody 787 jet for a year because of quality control issues.
The company said it will have to pay $3.5 billion to compensate customers for the delayed deliveries. It only delivered 14 of the planes in 2021, and none since June. It also said the delays would increase the costs of producing the plane by an estimated $2 billion, with most of those costs coming at the end of this year. It booked $285 million of those increased costs in the just completed quarter.
“We are progressing through a comprehensive effort to ensure every airplane in our production system conforms to our exacting specifications. This effort continues to impact our deliveries and our financial results — but we are fully confident it is the right thing to do,” said Boeing CEO Dave Calhoun in a memo to employees Wednesday. “While we never want to disappoint our customers or miss expectations, the work we’re putting in now will build stability and predictability going forward.”
The charges caused the company to report a net loss of $4.3 billion for the year, which is actually an improvement from the $11.9 billion it lost in 2020. Its core loss, excluding special items, came to $4.1 billion for the year, reversing a narrow profit on that basis in the first nine months of 2021. It’s a core quarterly loss on that basis of $4.5 billion. That was far worse than analysts had forecast
The quarterly results did include some good news for Boeing. The company had a positive cash flow for the first time since the first quarter of 2019, the period in which the problems with the 737 Max started. Calhoun said the positive cash flow demonstrated progress in the company’s recovery.
The Max grounding and the onset of the pandemic caused the company to burn through cash. The Max eventually cost Boeing more than $21 billion in documented costs and led to more than 1,000 canceled orders for the jets that sharply reduced revenue.
So problems with the 787 Dreamliner were the last thing the company needed. And the delivery and quality issues are not the only headwinds for the plane.
Built with innovative lightweight carbon fiber instead of aluminum for much of its fuselage, the Dreamliner was mainly designed for long-haul international routes. But international travel is the sector of the airline industry expected to be the last to recover from the ongoing pandemic downturn. Orders for the jet fell to just 21 in 2021, down from 113 in 2019.
“We are taking the time now to ensure we’re positioned well as widebody demand recovers,” said Calhoun in his memo to employees.
Despite the results falling short of forecasts, Boeing shares edged up 2% in premarket trading. Although analysts and investors did not know the amount of the costs associated with the 787 problems, they did know these problems would show up in results sooner rather than later. Having details on those costs helped assure investors the problems wouldn’t be worse than they had anticipated.
The-CNN-Wire
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