Boeing CFO Forecasts $4B+ Q1 Cash Burn and Negative Margins in 2025 Amid 737 MAX Challenges

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Key Insights

• Boeing CFO Brian West predicts a cash burn of $4 billion to $4.5 billion in Q1 2024 due to slowed production and delivery amid federal safety probes.
• The commercial aviation segment is expected to record approximately -20% operating margins in Q1 2024.
• Since January 5, 2024, Boeing shares have declined over 25%, following a serious in-flight fuselage incident involving a 737-9 MAX operated by Alaska Airlines.

In a recent Bank of America conference held in London, Boeing’s Chief Financial Officer Brian West disclosed that the company anticipates significantly higher cash outflows in the first quarter of 2024 than previously projected. The increase stems from ongoing efforts to restore Boeing’s reputation amid a federal investigation into its safety protocols.

West outlined that the expected cash burn ranges between $4 billion and $4.5 billion for Q1 alone, surpassing earlier forecasts. This elevated cash usage is unlikely to be offset during the remainder of the year, suggesting a total annual free cash flow in the low single-digit billions.

These financial pressures are expected to delay Boeing’s target of achieving $10 billion in annual free cash flow, pushing that goal to 2025 or 2026.

West also projected that Boeing’s commercial aviation unit will endure operating margins near negative 20% in the first quarter. While some margin recovery is anticipated over the year, overall profitability for 2024 is expected to remain negative.

The company has reduced 737 MAX production to under 38 aircraft per month, a move that will continue to impact financial performance in the coming months.

This production cap follows a January 2024 Federal Aviation Administration (FAA) directive halting expansion of 737 MAX output amid safety investigations triggered by a January 5 incident where a 737-9 MAX operated by Alaska Airlines lost part of its fuselage shortly after takeoff.

Regarding Boeing’s potential acquisition of Spirit AeroSystems Holdings Inc., a former Boeing supplier spun off in 2005, West emphasized that both companies view the deal as beneficial for aerospace safety and quality. Any acquisition would be financed through cash and debt, excluding equity issuance.

As of mid-Wednesday trading, Boeing’s shares rose 2.4% to $185.52 but have still declined over 26% since the start of 2024. Spirit AeroSystems shares increased by 6.7%.

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