Boeing Posts First Profit in Almost Two Years Helped by 737 MAX Deliveries
By Kathi on Jul 28, 2021 | 03:38 AM IST
Boeing Co
on Wednesday posted its first quarterly profit in almost two years, as
deliveries of its best-selling 737 MAX jets to airlines gained traction amid a
sharp rebound in travel bookings following an increase in global COVID-19
vaccinations.
The 737 MAX is integral to Boeing’s financial recovery, as
the U.S. plane maker scrambles to recoup billions of dollars in lost sales from
the pandemic, push past the safety scandal caused by two fatal 737 MAX crashes,
and deal with structural defects of its bigger, more profitable 787 planes.
Boeing shares were up 5% at $233 in midday trading
following the results, which were also fueled by higher defense and services
sales.
Chief Executive Officer David Calhoun said in a message to
employees the company now plans to keep staffing levels stable at around
140,000 employees, after previously targeting a reduction to 130,000 by the end
of 2021.
Calhoun told investors on the company’s earnings conference
call, “The U.S. domestic market is showing remarkable recovery.” But he
cautioned Boeing’s recovery faces threats such as a longer-off return of
international travel, COVID-19 variants, and a labor shortage in its sprawling
supply chain.
“We anticipate a multi-year recovery,” Calhoun added.
Boeing’s 737 MAX remains grounded in China, where trade
tensions between Washington and Beijing have stunted sales, though Calhoun said
he still expects the 737 MAX to win approval before year-end.
“Hopefully bigger trade issues don’t get in the way,” Calhoun
added.
The company is also working against tougher regulatory
scrutiny and weak demand for its delayed 777X mini-jumbo, and months of costly
repairs and forensic inspections to fix production-related defects on its 787
program.
Boeing reiterated plans to cut 787 productions to an
unspecified rate lower than 5 jets per month after finding a new problem, first
reported by Reuters, and to deliver fewer than half of the lingering 100 or so
787 Dreamliners in its inventory this year – instead of the “vast majority” it
had expected.
“Good news, the inspections are done, toe to tail,” Calhoun
said. “The underlying causes are getting understood and resolved.”
Calhoun added that Boeing may need to rethink its plan for
production rate increases if the 737 MAX is not approved in China by year-end.
Boeing said it has delivered more than 130 737 MAXs since a
safety ban on that jet was lifted in November 2020, and that it was building 16
737 MAX jets per month at its Seattle-area factory. It aims to increase output
to 31 per month by early 2022.
“Defense markets are strong and they’re successfully
conserving cash,” said Teal Group analyst Richard Aboulafia. “Much depends on
the angle of the commercial recovery.”
Looking to build momentum, Boeing is preparing to launch
its delayed CST-100 Starliner astronaut capsule to the International Space
Station on Friday in a crucial do-over test following a near “catastrophic
failure” during its 2019 debut.
Calhoun said he is “optimistic, confident” about Friday’s
launch after software flaws and NASA reviews sidelined its Starliner for 18
months, and about Boeing’s ability to compete against newer space players such
as billionaire entrepreneur Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin.
Boeing’s core operating profit was $755 million in the
second quarter, compared with a loss of $3.32 billion a year earlier.
Revenue rose 44% to about $17 billion.
Analysts had on average expected Boeing to report a
quarterly loss of $454.8 million on revenue of $16.54 billion, IBES data from
Refinitiv showed.
Boeing’s commercial airplanes division, its traditional
profit powerhouse, reported a quarterly loss of $472 million, but its defense
business earned $958 million, and its services division took in $531 million.
Boeing still expects to turn cash flow positive in 2022.