Boeing on Wednesday reported a $355 million loss for the first three months of the year as it grapples with a quality crisis stemming from a Jan. 5 flight during which a panel blew up one of its planes.
The loss was not as steep as analysts expected and was smaller than the $425 million loss in the first quarter of last year. Boeing generated more than $16.5 billion in revenue in the first quarter, less than it reported last year, and the company burned through nearly $4 billion in cash, both beating analyst expectations.
The panel explosion of a 737 Max 9 aircraft during an Alaska Airlines flight caused no major injuries, but the incident dealt a blow to the company, reviving concerns about Boeing’s practices five years after two fatal crashes involving planes 737 Max 8. Since the Jan. 5 flight, the company has taken steps to improve quality, including expanding inspections, changing how work is done, increasing training and soliciting more employee feedback.
“We are absolutely committed to doing everything we can to ensure that our regulators, customers, employees and the flying public have 100 percent confidence in Boeing,” Boeing CEO Dave Calhoun said in a letter to employees on Wednesday.
Last month, Calhoun said he would step down before the end of the year as part of an administrative shakeup. Boeing is also in talks to buy Spirit AeroSystems, a troubled supplier that builds the body of the Max aircraft and had been part of Boeing until it split two decades ago.
The Federal Aviation Administration has increased scrutiny of Boeing, limiting 737 production to 38 planes per month, although production remains well below that level. The regulator has demanded that Boeing draw up a plan to improve quality by the end of May. In a call with financial analysts, Calhoun said Boeing had been in regular contact with the FAA as it developed that plan.
Boeing had hoped to produce 50 737s and 10 larger 787s per month starting next year, but analysts say the company is unlikely to meet that goal. On the call, Calhoun said the Spirit acquisition would play an important role in achieving those goals. The recent crisis contributed to a significant slowdown in deliveries in the first quarter, although the company reported a respectable 126 net new orders, thanks in large part to an order from American Airlines for dozens of 737 Max 10 aircraft, an aircraft that the FAA has not yet authorized. to certificate. Boeing said it had an order book for 5,600 planes, valued at $448 billion.
“In the short term, yes, we are in a difficult time,” Calhoun said in the letter to employees. “Lower deliveries can be difficult for our customers and our finances. But safety and quality must be and will be above all.”
After the company’s first-quarter results were announced, Moody’s downgraded Boeing’s debt one notch to its lowest investment-grade rating, Baa3. The agency cited the “inadequate performance” of Boeing’s commercial aircraft division.
That part of the company reported an operating loss of more than $1.1 billion, offset by an operating profit of $151 million in its defense division and a profit of $916 million in its services division, which provides security support. maintenance to clients.
After the Jan. 5 flight, all Max 9 planes were briefly banned from flying, frustrating Alaska Airlines, United Airlines and other companies that rely on the plane. Both airlines said last week they would have reported quarterly profits for the start of the year if not for the plane grounding.
United said it would receive an undisclosed amount of compensation from Boeing to use on future plane purchases, while Alaska CEO Ben Minicucci told reporters and analysts in a phone call last week that Boeing had paid his airline 162 million dollars. Minicucci described that payment as a “strong reflection” of the airline’s close relationship with Boeing.
“Alaska needs Boeing, our industry needs Boeing and our country needs Boeing,” he said.
Boeing faced two tense Senate hearings this month, one focused on criticism of the company’s safety culture and another in which concerns were raised by a whistleblower who had raised questions about the durability of the 787 Dreamliner, a jetliner. double hallway often used for long periods of time. remote flights. Boeing has vehemently denied its allegations, saying the plane’s body has shown no signs of fatigue after extensive testing and years of commercial flying.
In February, an FAA panel of experts concluded a year-long investigation and found that Boeing’s safety culture remains flawed despite improvements made after fatal crashes in 2018 and 2019. The panel also found that Boeing had made progress in limiting interference from employees carrying out delegated supervision. on behalf of the FAA, but that there are still opportunities to retaliate.
Boeing has said it takes those findings seriously. The company has briefly paused work at more than a dozen sites to host quality discussions with more than 70,000 employees, Calhoun said in his letter to employees. Through these meetings, the company has received more than 30,000 recommendations for improvement. He also encouraged workers to raise concerns through his internal “Speak Up” portal, leading to a five-fold increase in submissions from the first quarter of last year.
The union representing Boeing engineers and other workers said the company had more work to do to protect employees who speak out. On Tuesday, the union, the Society of Professional Aerospace Engineering Employees, said Boeing had punished two engineers who were authorized to perform some FAA oversight after they raised concerns in 2022 about analyzes of technology used in the aircraft. 777 and 787 airplanes.
Managers objected to those concerns at the time, saying addressing them could be costly and cause delays, according to the union. The engineers ultimately prevailed, but later received negative performance evaluations, leading one to resign and the other to file a formal “Speak Up” complaint with Boeing. Now, the union is asking the National Labor Relations Board to force Boeing to share a report on the situation it had filed with the FAA.
In a statement, Boeing denied punishing employees for speaking out.
“We have zero tolerance for retaliation and encourage our employees to speak up when they see a problem,” the company said. “After an extensive review of documentation and interviewing more than a dozen witnesses, our investigators found no evidence of retaliation or interference.”
To address complaints that the company has focused excessively on financial results, Boeing said this month it would more closely align employee compensation with quality measures. Operational performance will now account for about 60 percent of the score used to determine annual incentives at Boeing’s commercial airplane division, up from 25 percent.