Boeing said Wednesday that it lost $355 million on falling revenue in the first quarter, another sign of the crisis gripping the aircraft manufacturer as it faces increasing scrutiny over the safety of its planes and accusations of shoddy work from a growing number of whistleblowers.
CEO David Calhoun said the company is in “a tough moment,” and its focus is on fixing its manufacturing issues, not the financial results.
Company executives have been forced to talk more about safety and less about finances since a door plug blew out of a Boeing 737 Max during an Alaska Airlines flight in January, leaving a gaping hole in the plane.
The accident halted progress that Boeing seemed to be making while recovering from two deadly crashes of Max jets in 2018 and 2019.
Those crashes in Indonesia and Ethiopia now are back in the spotlight, too. The families of some of the 346 people killed in the crashes were scheduled to meet with U.S. Justice Department officials later Wednesday. Family members have tried unsuccessfully to undo a 2021 settlement between the department and Boeing that let the company avoid criminal prosecution.
“Although we report first-quarter financial results today, our focus remains on the sweeping actions we are taking following the Alaska Airlines Flight 1282 accident,” Calhoun told employees in a memo Wednesday.
He ticked off a series of actions the company is taking and reported “significant progress” in improving manufacturing quality, much of it by slowing down production, which means fewer planes for its airline customers. Calhoun told CNBC that closer inspections were resulting in 80% fewer flaws in the fuselages coming from key supplier Spirit AeroSystems.
“Near term, yes, we are in a tough moment,” he wrote to employees. “Lower deliveries can be difficult for our customers and for our financials. But safety and quality must and will come above all else.”
Calhoun, who will step down at the end of the year, said again he is fully confident the company will recover.
Boeing said the first-quarter loss, excluding special items came to $1.13 per share, which was better than the loss of $1.63 per share that analysts had forecast, according to a FactSet survey.
Revenue fell 7.5%, to $16.57 billion.
Company shares rose 3% shortly after the start of morning trading.
Boeing stock has plunged by about one-third since the Alaska Airlines door-plug blowout. The Federal Aviation Administration has stepped up its oversight and given Boeing until late May to produce a plan to fix problems in manufacturing 737 Max jets. Airline customers are unhappy about not getting all the new planes that they had ordered because of delivery disruptions.
Investigators looking into the Alaska flight say bolts that help keep the door plug in place were missing after repair work at a Boeing factory. The FBI told passengers that they might be crime victims.
Several former and one current manager have reported various problems in manufacturing of Boeing 737 and 787 jetliners. The most recent, a quality engineer, told Congress last week that Boeing is taking manufacturing shortcuts that could eventually cause 787 Dreamliners to break apart. Boeing pushed back aggressively against his claims.
Boeing, however, has a couple things in its favor.
Along with Airbus, Boeing forms one-half of a duopoly that dominates the manufacturing of large passenger planes. Both companies have yearslong backlogs of orders from airlines eager for new, more fuel-efficient planes. And Boeing is a major defense contractor for the Pentagon and governments around the world.
Richard Aboulafia, a longtime industry analyst and consultant at AeroDynamic Advisory, said despite all the setbacks Boeing still has a powerful mix of products in high demand, technology and people.
“Even if they are No. 2 and have major issues, they are still in a very strong market and an industry that has very high barriers to entry,” he said.
And despite massive losses — about $24 billion in the last five years — the company is not at risk of failing, Aboulafia said.
“This isn’t General Motors in 2008 or Lockheed in 1971,” Aboulafia said, referring to two iconic corporations that needed massive government bailouts or loan guarantees to survive.
All of those factors help explain why 20 analysts in a FactSet survey rate Boeing shares as “Buy” or “Overweight” and only two have “Sell” ratings. (Five have “Hold” ratings.)
