Category Archives: Boeing

Reuters: FAA proposes requiring key Boeing 737 MAX design changes

From Reuters:

“The Federal Aviation Administration said on Monday it is proposing requiring four key Boeing 737 MAX design changes to address safety issues seen in two crashes that killed 346 people and led to the plane’s grounding in March 2019.

The agency is issuing a proposed airworthiness directive to require updated flight-control software, revised display-processing software to generate alerts, revising certain flight-crew operating procedures, and changing the routing of some wiring bundles.”

Read the full report.

Boeing CEO updates employees on quarterly results and market realities

Boeing President and CEO Dave Calhoun issued the following letter to employees today addressing aerospace market realities:

Team,

These past few months have been unlike anything we’ve seen. The pandemic’s effect on our communities and industry is ongoing. And the challenges we face as a company are still unfolding.

As cases continue to rise in areas around the globe, health and safety remain a top priority. My thanks go to everyone who is supporting our safety efforts, wearing face coverings and upholding our shared accountability for keeping one another safe. All those affected directly by COVID-19 also have my sympathies.

The reality is the pandemic’s impact on the aviation sector continues to be severe. Though some fliers are returning slowly to the air, their numbers remain far lower than 2019, with airline revenues likewise reduced. This pressure on our commercial customers means they are delaying jet purchases, slowing deliveries, deferring elective maintenance, retiring older aircraft and reducing spend — all of which affects our business and, ultimately, our bottom line. While there have been some encouraging signs, we estimate it will take around three years to return to 2019 passenger levels.

That’s why we’ve been taking decisive actions. To bolster our near-term liquidity, we suspended our dividend, terminated our share repurchasing program, reduced discretionary spending and overhead costs, and issued $25 billion in new debt.

While these steps help us navigate the pandemic, they don’t change the fact that the commercial marketplace is different, and we must change with it. To align to a smaller market, we lowered commercial production rates and took tough workforce actions throughout the quarter.

Unfortunately, it’s become clear that we need to make further adjustments based on the prolonged impact of COVID-19.

The changes include further lowering our commercial airplane production rates:

– We will have a slower ramp-up in 737 production than previously planned, with a gradual increase to 31 per month by the beginning of 2022.

– We will reduce the combined 777/777X production rate to two per month in 2021, which is one unit lower per month than we announced last quarter.

– We will further reduce 787 production to six per month in 2021. This is an adjustment down from the reduction we announced last quarter to 10 per month currently and seven per month by 2022. With this lower rate profile, we will also need to evaluate the most efficient way to produce the 787, including studying the feasibility of consolidating production in one location. We will share more with you following our study.

– While our 767 and 747 rates remain unchanged, in light of the current market dynamics and outlook, we’ll complete production of the iconic 747 in 2022. Our customer commitment does not end at delivery, and we’ll continue to support 747 operations and sustainment well into the future.

The work you’ve done on these programs has been tremendous. I have been impressed during every visit to our production facilities. These production rate changes are not a reflection on your work or our capability. The market simply won’t support higher output levels at this time, and we need to adapt accordingly.

As you know, we previously announced a net 10% workforce reduction in 2020 through a combination of voluntary layoffs, attrition and involuntary layoffs (ILOs) to align to a smaller market. The first wave of associates affected by ILOs received notification in May, and we continue to conduct smaller, phased workforce reductions to reach this target. Managers are communicating the latest wave of those reductions beginning today.

Regretfully, the prolonged impact of COVID-19 causing further reductions in our production rates and lower demand for commercial services means we’ll have to further assess the size of our workforce. This is difficult news, and I know it adds uncertainty during an already challenging time. We will try to limit the impact on our people as much as possible going forward. And as always, we will communicate openly, honestly and transparently with you.

The diversity of our portfolio and our government services, defense and space programs provide some stability in the near term as we take these tough but necessary steps. And we’ll continue working to meet our commitments and deliver on our priorities.

As we look to the future, we also are focused on not just adapting and recovering but also emerging stronger and more resilient. That includes proactively reviewing every aspect of our company to identify opportunities to improve, align to our new market and strengthen our culture. We are looking holistically at our infrastructure footprint, our overhead and organizational structure, our portfolio and investments, our supply chain health and stability, and our ability to drive operational excellence and a keen focus on safety in everything we do.

And while we’re facing challenges, it’s important to remember the good work and innovation underway across our company. This is absolutely necessary for our future. Aerospace has always proven to be resilient — and so has Boeing.

Thank you for facing these challenges with me. I could not ask for a better team.

Dave

Boeing reports a large second quarter loss

Boeing released this second quarter statement:

  • Financial results continue to be significantly impacted by COVID-19 and the 737 MAX grounding
  • Revenue of $11.8 billion, GAAP loss per share of ($4.20) and core (non-GAAP)* loss per share of ($4.79)
  • Operating cash flow of ($5.3) billion; cash and marketable securities of $32.4 billion
  • Total backlog of $409 billion, including more than 4,500 commercial airplanes

 

Table 1. Summary Financial Results

Second Quarter

First Half

(Dollars in Millions, except per share data)

2020

2019

Change

2020

2019

Change

Revenues

$11,807

$15,751

(25)%

$28,715

$38,668

(26)%

GAAP

Loss From Operations

($2,964)

($3,380)

NM

($4,317)

($1,030)

NM

Operating Margin

(25.1)%

(21.5)%

NM

(15.0)%

(2.7)%

NM

Net Loss

($2,395)

($2,942)

NM

($3,036)

($793)

NM

Loss Per Share

($4.20)

($5.21)

NM

($5.31)

($1.40)

NM

Operating Cash Flow

($5,280)

($590)

NM

($9,582)

$2,198

NM

Non-GAAP*

Core Operating Loss

($3,319)

($3,745)

NM

($5,019)

($1,759)

NM

Core Operating Margin

(28.1)%

(23.8)%

NM

(17.5)%

(4.5)%

NM

Core Loss Per Share

($4.79)

($5.82)

NM

($6.49)

($2.60)

NM

*Non-GAAP measure; complete definitions of Boeing’s non-GAAP measures are on page 6, “Non-GAAP Measures Disclosures.”    

The Boeing Company reported second-quarter revenue of $11.8 billion, GAAP loss per share of ($4.20) and core loss per share (non-GAAP)* of ($4.79), primarily reflecting the impacts of COVID-19 and the 737 MAX grounding (Table 1). Boeing recorded operating cash flow of ($5.3) billion.

“We remained focused on the health of our employees and communities while proactively taking action to navigate the unprecedented commercial market impacts from the COVID-19 pandemic,” said Boeing President and Chief Executive Officer Dave Calhoun. “We’re working closely with our customers, suppliers and global partners to manage the challenges to our industry, bridge to recovery and rebuild to be stronger on the other side.”

In the second quarter, Boeing restarted production operations across key sites following temporary pauses to protect its workforce and introduce rigorous new health and safety procedures. Despite the challenges, Boeing continued to deliver across key commercial, defense, space and services programs. The company also resumed early stages of production on the 737 program with a focus on safety, quality and operational excellence. Following the lead of global regulators, Boeing made steady progress toward the safe return to service of the 737, including completion of FAA certification flight tests.

To align to the sharp reduction in commercial market demand in light of COVID-19, the company is taking several actions including further adjusting commercial airplane production rates and reducing employment levels.

“The diversity of our balanced portfolio and our government services, defense and space programs provide some critical stability for us in the near-term as we take tough but necessary steps to adapt for new market realities,” Calhoun said. “We are taking the right action to ensure we’re well positioned for the future by strengthening our culture, improving transparency, rebuilding trust and transforming our business to become a better, more sustainable Boeing. Air travel has always proven to be resilient – and so has Boeing.”

Table 2. Cash Flow

Second Quarter

First Half

(Millions)

2020

2019

2020

2019

Operating Cash Flow

($5,280)

($590)

($9,582)

$2,198

Less Additions to Property, Plant & Equipment

($348)

($421)

($776)

($922)

Free Cash Flow*

($5,628)

($1,011)

($10,358)

$1,276

*Non-GAAP measure; complete definitions of Boeing’s non-GAAP measures are on page 6, “Non-GAAP Measures Disclosures.”    

Operating cash flow was ($5.3) billion in the quarter, primarily reflecting lower commercial deliveries and services volume due to COVID-19 and the 737 MAX grounding, as well as timing of receipts and expenditures (Table 2).

Table 3. Cash, Marketable Securities and Debt Balances

Quarter-End

(Billions)

Q2 20

Q1 20

Cash

$20.0

$15.0

Marketable Securities1

$12.4

$0.5

Total

$32.4

$15.5

Debt Balances:

The Boeing Company, net of intercompany loans to BCC

$59.5

$36.9

Boeing Capital, including intercompany loans

$1.9

$2.0

Total Consolidated Debt

$61.4

$38.9

1 Marketable securities consists primarily of time deposits due within one year classified as “short-term investments.”

Cash and investments in marketable securities increased to $32.4 billion, compared to $15.5 billion at the beginning of the quarter, driven by the issuance of new debt (Table 3). Debt was $61.4 billion, up from $38.9 billion at the beginning of the quarter due to the issuance of new debt, partially offset by repayment of maturing debt.

Total company backlog at quarter-end was $409 billion.

Segment Results

Commercial Airplanes

Table 4. Commercial Airplanes

Second Quarter

First Half

(Dollars in Millions)

2020

2019

Change

2020

2019

Change

Commercial Airplanes Deliveries

20

90

(78)%

70

239

(71)%

Revenues

$1,633

$4,722

(65)%

$7,838

$16,544

(53)%

Loss from Operations

($2,762)

($4,946)

NM

($4,830)

($3,773)

NM

Operating Margin

(169.1)%

(104.7)%

NM

(61.6)%

(22.8)%

NM

Commercial Airplanes second-quarter revenue and operating margin decreased reflecting lower delivery volume, partially offset by a lower 737 MAX customer consideration charge of $551 million in the quarter compared to a $5.6 billion charge in the same period last year. Second-quarter operating margin was also negatively impacted by $712 million of abnormal production costs related to the 737 program, $468 million of severance expense and $133 million of abnormal production costs from the temporary suspension of operations in response to COVID-19.

The 737 program resumed early stages of production in May and expects to continue to produce at low rates for the remainder of 2020. The COVID-19 pandemic has significantly impacted air travel and reduced near-term demand, resulting in lower production and delivery rate assumptions. Commercial Airplanes expects to gradually increase the 737 production rate to 31 per month by the beginning of 2022, with further gradual increases to correspond with market demand. Estimated potential concessions and other considerations to customers related to the 737 MAX grounding increased by $551 million in the quarter. There was no material change to estimated abnormal production costs.

Commercial Airplanes has further updated its production rate assumptions this quarter to reflect impacts of COVID-19 on its demand outlook, and will continue to assess them on an ongoing basis. The 787 production rate will be reduced to 6 per month in 2021. The 777/777X combined production rate will be gradually reduced to 2 per month in 2021, with 777X first delivery targeted for 2022. At this time, production rate assumptions have not changed on the 767 and 747 programs.

Commercial Airplanes delivered 20 airplanes during the quarter, and backlog included over 4,500 airplanes valued at $326 billion.

Defense, Space & Security

Table 5. Defense, Space & Security

Second Quarter

First Half

(Dollars in Millions)

2020

2019

Change

2020

2019

Change

Revenues

$6,588

$6,579

$12,630

$13,166

(4)%

Earnings from Operations

$600

$975

(38)%

$409

$1,827

(78)%

Operating Margin

9.1%

14.8%

(5.7) Pts

3.2%

13.9%

(10.7) Pts

Defense, Space & Security second-quarter revenue was $6.6 billion, reflecting COVID-19 impact on derivative aircraft programs, partially offset by higher volume across the remainder of the portfolio (Table 5). Second-quarter operating margin decreased to 9.1 percent primarily due to a gain on sale of property in the second quarter of 2019 and a $151 million KC-46A Tanker charge primarily driven by additional fixed cost allocation resulting from lower commercial airplane production volume due to COVID-19.

During the quarter, Defense, Space & Security received an award for three additional MQ-25 unmanned aerial refueling aircraft for the U.S. Navy, as well as contracts for Cruise Missile Systems for the U.S. Navy and a contract for 24 AH-64E Apache helicopters for the Kingdom of Morocco. Defense, Space & Security completed Critical Design Review for the T-7A advanced trainer, achieved first flight and delivery of the F/A-18 U.S. Navy Block III Super Hornet, and achieved first flight of the F-15 Qatar Advanced aircraft. Defense, Space & Security also delivered the 100th U.S. Navy P-8A Poseidon, the 400th V-22 Osprey, and the 2,500th AH-64 Apache.

Backlog at Defense, Space & Security was $64 billion, of which 31 percent represents orders from customers outside the U.S.

Global Services

Table 6. Global Services

Second Quarter

First Half

(Dollars in Millions)

2020

2019

Change

2020

2019

Change

Revenues

$3,488

$4,543

(23)%

$8,116

$9,162

(11)%

(Loss)/Earnings from Operations

($672)

$687

NM

$36

$1,340

NM

Operating Margin

(19.3)%

15.1%

NM

0.4%

14.6%

NM

Global Services second-quarter revenue decreased to $3.5 billion, driven by lower commercial services volume due to COVID-19, partially offset by higher government services volume (Table 6). Second-quarter operating margin decreased to (19.3) percent primarily due to lower commercial services volume, less favorable mix of products and services, and $923 million of charges related to asset impairments and severance costs as a result of the COVID-19 market environment.

During the quarter, Global Services was awarded a contract modification for P-8A integrated logistics support for the U.S. Navy. Global Services captured an order for four 767-300 freighter conversions for DHL and was awarded a contract for F-15 pre-delivery training support for the Qatar Emiri Air Force. Global Services also delivered the first F/A-18 Super Hornet test aircraft modified for the U.S. Navy Blue Angels.

Additional Financial Information

Table 7. Additional Financial Information

Second Quarter

First Half

(Dollars in Millions)

2020

2019

2020

2019

Revenues

Boeing Capital

$69

$75

$134

$141

Unallocated items, eliminations and other

$29

($168)

($3)

($345)

Earnings from Operations

Boeing Capital

($7)

$37

$17

$57

FAS/CAS service cost adjustment

$355

$365

$702

$729

Other unallocated items and eliminations

($478)

($498)

($651)

($1,210)

Other income, net

$94

$107

$206

$213

Interest and debt expense

($553)

($154)

($815)

($277)

Effective tax rate

30.0%

14.2%

38.4%

27.5%

At quarter-end, Boeing Capital’s net portfolio balance was $2.1 billion. Revenue from other unallocated items and eliminations increased primarily due to reserves related to cost accounting litigation recorded in the second quarter of 2019. Interest and debt expense increased due to higher debt balances. The second quarter effective tax rate reflects tax benefits related to the 5 year net operating loss carryback provision in the Coronavirus Aid, Relief, and Economic Security (CARES) Act as well as the impact of pre-tax losses.

Reuters: Boeing to delay 777X as demand drops for big jets

From Reuters:

“Boeing Company is preparing to delay its all-new 777X jet by several months or up to a year, three people familiar with the matter said, as the COVID-19 crisis exacerbates a drop in demand for the industry’s largest jetliners.”

Read the full report.

New Boeing 777-9 (777X) with foldable wingtips

Above Copyright Photo: Boeing 777-9 (777X) N779XX (msn 64241) PAE (Nick Dean). Image: 949445.

Boeing and Etihad broaden sustainability alliance by testing innovations on ecoDemonstrator 787

Boeing and Etihad Airways will use a 787-10 Dreamliner to test ways to reduce emissions and noise as part of the aerospace company’s ecoDemonstrator program before the airline accepts delivery of the airplane this fall. The collaboration, which includes extensive sound measurement testing with industry partners, builds on a strategic sustainability alliance Boeing and Etihad formed in November 2019.

 

The ecoDemonstrator program utilizes commercial aircraft to test technologies that can make aviation safer and more sustainable now and into the future. The 2020 program, which will begin testing in August, is the first to use a Boeing 787-10.

Boeing and Etihad will work with industry-leading partners, including NASA and Safran Landing Systems, to conduct aircraft noise measurements from sensors on the airplane and the ground. The data will be used to validate aircraft noise prediction processes and the sound reduction potential of aircraft designs, including landing gear, that are modified for quieter operations.

In addition, a flight will be conducted during which pilots, air traffic controllers and an airline’s operations center will simultaneously share digital information to optimize routing efficiency and enhance safety by reducing workload and radio frequency congestion.

Test flights will be flown on a blend of sustainable fuel, which significantly lowers aviation’s environmental footprint. The testing program is expected to last about four weeks before Etihad enters its Boeing 787-10 into service.

Boeing to resume 737 MAX test flights with new software

Boeing has received Federal Aviation Administration (FAA) approval to start test flights of its 737 MAX to demonstrate that it can fly safely with new MCAS flight control software according to the New York Times.

Copyright Photo: Joe G. Walker. MAX aircraft in storage.

Spirit AeroSystems furloughs 900 employees due to Boeing order to slow MAX production

Spirit AeroSystems made this announcement:

On June 4, 2020, Spirit AeroSystems received a letter from Boeing directing Spirit to pause additional work on four 737 MAX shipsets and avoid starting production on sixteen 737 MAX shipsets to be delivered in 2020, until otherwise directed by Boeing, in order to support Boeing’s alignment of near-term delivery schedules to its customers’ needs in light of COVID-19’s impact on air travel and airline operations, and in order to mitigate the expenditure of potential unnecessary production costs.

Based on the information in the letter, subsequent correspondence from Boeing dated June 9, 2020, and Spirit’s discussions with Boeing regarding 2020 737 MAX production, Spirit believes there will be a reduction to Spirit’s previously disclosed 2020 737 MAX production plan of 125 shipsets. Spirit does not yet have definitive information on what the magnitude of the reduction will be but expects it will be more than 20 shipsets.

The 737 MAX grounding coupled with the COVID-19 pandemic is a challenging, dynamic and evolving situation. During this time, Spirit plans to work with Boeing to determine a definitive production plan for 2020 and manage the 737 MAX production system and supply chain.

Due to the matters described above, Spirit has elected to place certain Wichita hourly employees directly associated with production work and support functions for the 737 MAX program on a 21 calendar day unpaid temporary layoff/furlough effective Monday, June 15. In addition, Spirit will declare an immediate reduction of the hourly workforce in Tulsa and McAlester, Okla., effective Friday, June 12.

Boeing resumes 737 MAX production

Boeing has resumed production of the 737 MAX at the company’s Renton, Washington factory. The 737 program began building airplanes at a low rate as it implements more than a dozen initiatives focused on enhancing workplace safety and product quality.

“We’ve been on a continuous journey to evolve our production system and make it even stronger,” said Walt Odisho, vice president and general manager of the 737 program. “These initiatives are the next step in creating the optimal build environment for the 737 MAX.”

During the temporary suspension of production that began in January, mechanics and engineers collaborated to refine and standardize work packages in each position of the factory. New kitting processes will also ensure that employees have everything they need at their fingertips to build the airplane.

“The steps we’ve taken in the factory will help drive our goal of 100 percent quality for our customers while supporting our ongoing commitment to workplace safety,” said Scott Stocker, vice president of 737 Manufacturing.

The 737 program will gradually ramp up production this year.

Copyright Photo: Rainer Bexten. MAXs in storage at Victorville, CA.