Category Archives: Boeing

Boeing recommends operators of some 737 MAX airplanes temporarily remove them from service to address a potential electrical issue

Boeing has issued a recommendation to 16 customers (including American, Southwest and United) to remove and inspect certain Boeing 737 MAX aircraft due to a “potential electrical issue”. This is apparently due to a production issue when the aircraft were built.

The FAA issued this statement:

Boeing recommends operators of some 737 MAX airplanes temporarily remove them from service to address a potential electrical issue. The FAA will ensure the issue is addressed. Passengers should contact airlines about possible flight delays and cancellations.

Boeing issued this statement:

Boeing has recommended to 16 customers that they address a potential electrical issue in a specific group of 737 MAX airplanes prior to further operations. The recommendation is being made to allow for verification that a sufficient ground path exists for a component of the electrical power system.

We are working closely with the U.S. Federal Aviation Administration on this production issue. We are also informing our customers of specific tail numbers affected and we will provide direction on appropriate corrective actions.

American Airlines has grounded 17 MAX aircraft.

American Airlines Boeing 737-8 MAX 8 N378SC (msn 44471) BFI (Joe G. Walker). Image: 952213.

Above Copyright Photo: American Airlines Boeing 737-8 MAX 8 N378SC (msn 44471) BFI (Joe G. Walker). Image: 952213.

Southwest Airlines has removed 30 of its 58 MAX aircraft for inspections.

Southwest Airlines Boeing 737-8 MAX 8 N8701Q (msn 42554) PAE (Nick Dean). Image: 953439.

Above Copyright Photo: Southwest Airlines Boeing 737-8 MAX 8 N8701Q (msn 42554) PAE (Nick Dean). Image: 953439.

United Airlines has grounded 16 of its 30 MAX aircraft according to USA Today.

United Airlines Boeing 737-9 MAX 9 N1780B (N27520) (msn 64499) PAE (Nick Dean). Image: 951068.

Above Copyright Photo: United Airlines Boeing 737-9 MAX 9 N1780B (N27520) (msn 64499) PAE (Nick Dean). Image: 951068.

Boeing statement on United Airlines flight 328

Boeing issued this statement:

“Boeing is actively monitoring recent events related to United Airlines Flight 328. While the NTSB investigation is ongoing, we recommended suspending operations of the 69 in-service and 59 in-storage 777s powered by Pratt & Whitney 4000-112 engines until the FAA identifies the appropriate inspection protocol.

Boeing supports the decision yesterday by the Japan Civil Aviation Bureau, and the FAA’s action today to suspend operations of 777 aircraft powered by Pratt & Whitney 4000-112 engines. We are working with these regulators as they take actions while these planes are on the ground and further inspections are conducted by Pratt & Whitney.

Updates will be provided as more information becomes available.”

FAA issues airworthiness directive for 222 Boeing 787 Dreamliners

From Reuters:

“The U.S. Federal Aviation Administration on Wednesday issued an airworthiness directive for certain Boeing Co 787 airplanes, asking for inspection of the jets following reports of torn decompression panels in the bilge area.

The directive comes as Boeing grapples with multiple production flaws on its 787 Dreamliners that have triggered intensive inspections and more than 80 undelivered planes.”

The Directive:

The FAA is adopting a new airworthiness directive (AD) for certain The Boeing Company Model 787-8, 787-9, and 787-10 airplanes. This AD requires repetitive general visual inspections of the bilge barriers located in the forward and aft cargo compartments for disengaged or damaged decompression panels, reinstallation of disengaged but undamaged decompression panels, and replacement of damaged decompression panels. This AD was prompted by reports of multiple incidents of torn decompression panels being found in the bilge area. The FAA is issuing this AD to address the unsafe condition on these products.

Boeing reports a large 4Q and 2020 loss

Boeing reports a massive 4Q and 2020 loss ($11.9 billion):

:

Fourth Quarter 2020

  • Financial results significantly impacted by COVID-19, 737 MAX grounding, and commercial widebody programs
  • 777X program recorded $6.5 billion pre-tax charge; first delivery expected in late 2023
  • 737 MAX began receiving regulatory approval to resume operations and restarted deliveries
  • Revenue of $15.3 billion, GAAP loss per share of ($14.65) and core (non-GAAP)* loss per share of ($15.25)

Full-Year 2020

  • Revenue of $58.2 billion, GAAP loss per share of ($20.88) and core (non-GAAP)* loss per share of ($23.25)
  • Operating cash flow of ($18.4) billion; cash and marketable securities of $25.6 billion
  • Total backlog of $363 billion, including more than 4,000 commercial airplanes
  • Strengthening safety processes, improving performance, managing liquidity and transforming for the future

Table 1. Summary Financial Results

Fourth Quarter

Full Year

(Dollars in Millions, except per share data)

2020

2019

Change

2020

2019

Change

Revenues

$15,304

$17,911

(15)%

$58,158

$76,559

(24)%

GAAP

Loss From Operations

($8,049)

($2,204)

NM

($12,767)

($1,975)

NM

Operating Margin

(52.6)%

(12.3)%

NM

(22.0)%

(2.6)%

NM

Net Loss

($8,439)

($1,010)

NM

($11,941)

($636)

NM

Loss Per Share

($14.65)

($1.79)

NM

($20.88)

($1.12)

NM

Operating Cash Flow

($4,009)

($2,220)

NM

($18,410)

($2,446)

NM

Non-GAAP*

Core Operating Loss

($8,377)

($2,526)

NM

($14,150)

($3,390)

NM

Core Operating Margin

(54.7)%

(14.1)%

NM

(24.3)%

(4.4)%

NM

Core Loss Per Share

($15.25)

($2.33)

NM

($23.25)

($3.47)

NM

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

The Boeing Company reported fourth-quarter revenue of $15.3 billion, reflecting lower commercial deliveries and services volume primarily due to COVID-19 as well as 787 production issues, partially offset by a lower 737 MAX customer considerations charge in the quarter compared to the same period last year (Table 1). GAAP loss per share of ($14.65) and core loss per share (non-GAAP)* of ($15.25) reflected a $6.5 billion pre-tax charge on the 777X program and a tax valuation allowance, partially offset by a lower 737 MAX customer considerations charge. Boeing recorded operating cash flow of ($4.0) billion.

“2020 was a year of profound societal and global disruption which significantly constrained our industry. The deep impact of the pandemic on commercial air travel, coupled with the 737 MAX grounding, challenged our results. I am proud of the resilience and dedication our global team demonstrated in this environment as we strengthened our safety processes, adapted to our market and supported our customers, suppliers, communities and each other,” said Boeing President and Chief Executive Officer Dave Calhoun. “Our balanced portfolio of diverse defense, space and services programs continues to provide important stability as we lay the foundation for our recovery. While the impact of COVID-19 presents continued challenges for commercial aerospace into 2021, we remain confident in our future, squarely-focused on safety, quality and transparency as we rebuild trust and transform our business.”

The return to service of the 737 MAX in the U.S. and several other markets was an important step, and Boeing continues to follow the lead of global regulators and support its customers. Since the FAA’s approval to return to operations, Boeing has delivered over 40 737 MAX aircraft and five airlines have safely returned their fleets to service as of January 25, 2021, safely flying more than 2,700 revenue flights and approximately 5,500 flight hours.

Boeing now anticipates that the first 777X delivery will occur in late 2023. This schedule, and the associated financial impact, reflect a number of factors, including an updated assessment of global certification requirements, the company’s latest assessment of COVID-19 impacts on market demand, and discussions with its customers with respect to aircraft delivery timing.

The company continues to progress through its business transformation effort across five key areas including its infrastructure footprint, overhead and organizational structure, portfolio and investment mix, supply chain health and operational excellence. Boeing will continue these actions in 2021 to preserve liquidity, adapt to the new market, improve performance, sustain key investments and transform its business to be more productive, resilient and competitive for the long term.

Table 2. Cash Flow

Fourth Quarter

Full Year

(Millions)

2020

2019

2020

2019

Operating Cash Flow

($4,009)

($2,220)

($18,410)

($2,446)

Less Additions to Property, Plant & Equipment

($265)

($447)

($1,303)

($1,834)

Free Cash Flow*

($4,274)

($2,667)

($19,713)

($4,280)

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

Operating cash flow was ($4.0) billion in the quarter, reflecting lower commercial deliveries and services volume, as well as timing of receipts and expenditures (Table 2).

Table 3. Cash, Marketable Securities and Debt Balances

Quarter-End

(Billions)

Q4 20

Q3 20

Cash

$7.8

$10.6

Marketable Securities1

$17.8

$16.5

Total

$25.6

$27.1

Debt Balances:

The Boeing Company, net of intercompany loans to BCC

$62.0

$59.1

Boeing Capital, including intercompany loans

$1.6

$1.9

Total Consolidated Debt

$63.6

$61.0

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

Cash and investments in marketable securities decreased to $25.6 billion, compared to $27.1 billion at the beginning of the quarter, primarily driven by operating cash outflows partially offset by changes in the debt balance (Table 3).

Total company backlog at quarter-end was $363 billion.

Segment Results

Commercial Airplanes

Table 4. Commercial Airplanes

Fourth Quarter

Full Year

(Dollars in Millions)

2020

2019

Change

2020

2019

Change

Commercial Airplanes Deliveries

59

79

(25)%

157

380

(59)%

Revenues

$4,728

$7,462

(37)%

$16,162

$32,255

(50)%

Loss from Operations

($7,648)

($2,844)

NM

($13,847)

($6,657)

NM

Operating Margin

(161.8)%

(38.1)%

NM

(85.7)%

(20.6)%

NM

Commercial Airplanes fourth-quarter revenue decreased to $4.7 billion, driven by lower widebody delivery volume due to COVID-19 impacts as well as 787 production issues, partially offset by higher 737 deliveries and a lower 737 MAX customer consideration charge in the quarter compared to the same period last year (Table 4). Fourth-quarter operating margin decreased to (161.8) percent, primarily driven by a $6.5 billion pre-tax charge on the 777X program, lower delivery volume, and $468 million of abnormal production costs related to the 737 program, partially offset by a lower 737 MAX customer consideration charge.

Commercial Airplanes production rate assumptions reflect the continued impacts of COVID-19 on commercial demand, and the company will continue to assess them on an ongoing basis. The 737 program is currently producing at a low rate and expects to gradually increase production to 31 per month in early 2022 with further gradual increases to correspond with market demand. The 787 program plans to transition its production rate to 5 per month in March 2021, at which point 787 final assembly will be consolidated to Boeing South Carolina.

As discussed above, Commercial Airplanes now expects first delivery of the 777X to occur in late 2023 and has recorded a $6.5 billion reach-forward loss on the 777X program. Among the factors contributing to the revised first delivery schedule and reach-forward loss are an updated assessment of certification requirements based on ongoing communication with civil aviation authorities, an updated assessment of market demand based on continued dialogue with customers, resulting adjustments to production rates and the program accounting quantity, increased change incorporation costs, and associated customer and supply chain impacts. The production rate expectation for the combined 777/777X program remains at 2 per month in 2021.

Commercial Airplanes captured orders for 75 737 aircraft from Ryanair and eight 777 freighters from DHL, as well as a commitment for 23 737 aircraft from Alaska Airlines. Commercial Airplanes delivered 59 airplanes during the quarter, and backlog included over 4,000 airplanes valued at $282 billion.

Defense, Space & Security

Table 5. Defense, Space & Security

Fourth Quarter

Full Year

(Dollars in Millions)

2020

2019

Change

2020

2019

Change

Revenues

$6,779

$5,927

14%

$26,257

$26,095

1%

Earnings from Operations

$502

$34

1,376%

$1,539

$2,615

(41)%

Operating Margin

7.4%

0.6%

6.8 Pts

5.9%

10.0%

(4.1) Pts

Defense, Space & Security fourth-quarter revenue increased to $6.8 billion, primarily driven by higher volume on fighter programs and the rest of the portfolio as well as a charge on the Commercial Crew program in the same period last year (Table 5). Fourth-quarter operating margin increased to 7.4 percent reflecting more favorable performance on multiple programs compared with the same period last year, partially offset by a $275 million pre-tax charge on the KC-46A Tanker program primarily due to production inefficiencies including impacts of COVID-19 disruption.

During the quarter, Defense, Space & Security was awarded contracts for two KC-46A aircraft for Japan and AEW&C upgrades for the Republic of Korea Air Force. Defense, Space & Security achieved first flight of the MQ-25 unmanned aircraft with an aerial refueling store and demonstrated ski-jump launch capability of the F/A-18 Super Hornet for the Indian Navy. Also in the quarter, Defense, Space & Security completed engineering design review for the Wideband Global SATCOM-11+ communications satellite and critical design review of the Space Launch System Exploration Upper Stage for NASA.

Backlog at Defense, Space & Security was $61 billion, of which 32 percent represents orders from customers outside the U.S.

Global Services

Table 6. Global Services

Fourth Quarter

Full Year

(Dollars in Millions)

2020

2019

Change

2020

2019

Change

Revenues

$3,733

$4,648

(20)%

$15,543

$18,468

(16)%

Earnings from Operations

$143

$684

(79)%

$450

$2,697

(83)%

Operating Margin

3.8%

14.7%

(10.9) Pts

2.9%

14.6%

(11.7) Pts

Global Services fourth-quarter revenue decreased to $3.7 billion, driven by lower commercial services volume due to COVID-19 (Table 6). Fourth-quarter operating margin decreased to 3.8 percent primarily due to lower commercial services volume and $290 million of pre-tax charges related to asset impairments driven by COVID-19.

During the quarter, Global Services was awarded a Performance Based Logistics contract for the Republic of Singapore Air Force F-15SG fleet, secured a F-15 spares and logistics support contract with the Qatar Emiri Air Force, and was selected to provide P-8A training for the Royal New Zealand Air Force. Global Services also announced a 10-year digital services agreement with Frontier Airlines.

Additional Financial Information

Table 7. Additional Financial Information

Fourth Quarter

Full Year

(Dollars in Millions)

2020

2019

2020

2019

Revenues

Boeing Capital

$56

$37

$261

$244

Unallocated items, eliminations and other

$8

($163)

($65)

($503)

(Loss)/Earnings from Operations

Boeing Capital

$16

($58)

$63

$28

FAS/CAS service cost adjustment

$328

$322

$1,383

$1,415

Other unallocated items and eliminations

($1,390)

($342)

($2,355)

($2,073)

Other income, net

$122

$104

$447

$438

Interest and debt expense

($698)

($242)

($2,156)

($722)

Effective tax rate

2.2%

56.9%

17.5%

71.8%

At quarter-end, Boeing Capital’s net portfolio balance was $2.0 billion. The change in revenue from other unallocated items and eliminations was primarily due to the timing of eliminations for intercompany aircraft deliveries. Other unallocated items and eliminations included a $744 million charge related to the previously announced agreement between Boeing and the U.S. Department of Justice in January 2021. Interest and debt expense increased due to higher debt balances. The fourth quarter 2020 effective tax rate primarily reflects an additional valuation allowance on certain deferred income tax assets, partially offset by the benefit of the five year net operating loss carryback provision in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

EASA declares Boeing 737 MAX safe to return to service in Europe

The European Union Aviation Safety Agency (EASA) gave its seal of approval for the return to service of a modified version of the Boeing 737 MAX, mandating a package of software upgrades, electrical wiring rework, maintenance checks, operations manual updates and crew training which will allow the plane to fly safely in European skies after almost two years on the ground.

“We have reached a significant milestone on a long road,” said EASA Executive Director Patrick Ky. “Following extensive analysis by EASA, we have determined that the 737 MAX can safely return to service. This assessment was carried out in full independence of Boeing or the Federal Aviation Administration and without any economic or political pressure – we asked difficult questions until we got answers and pushed for solutions which satisfied our exacting safety requirements.  We carried out our own flight tests and simulator sessions and did not rely on others to do this for us.

“Let me be quite clear that this journey does not end here,” he added. “We have every confidence that the aircraft is safe, which is the precondition for giving our approval. But we will continue to monitor 737 MAX operations closely as the aircraft resumes service. In parallel, and at our insistence, Boeing has also committed to work to enhance the aircraft still further in the medium term, in order to reach an even higher level of safety.”

The Boeing 737 MAX was grounded worldwide in March 2019 following the second of two accidents within just six months, which together claimed 346 lives. The root cause of these tragic accidents was traced to software known as the MCAS (Maneuvering Characteristics Augmentation System), intended to make the plane easier to handle. However, the MCAS, guided by only one Angle of Attack (AoA) sensor, kicked in repeatedly if that sensor malfunctioned, pushing the nose of the aircraft downward multiple times. In both accidents, pilots finally lost control of their plane, resulting in a crash with total loss of aircraft.

EASA’s conditions for Return to Service now met

In the days after the grounding, EASA set four conditions for the return to service of the aircraft:

  • The two accidents (JT610 and ET302) are deemed sufficiently understood
  • Design changes proposed by Boeing to address the issues highlighted by the accidents are EASA approved and their embodiment is mandated
  • An  independent extended design review has been completed by EASA 
  • Boeing 737 MAX flight crews have been adequately trained

“These four conditions have now all been met, allowing us to go ahead with the return to service,” Ky said.

To enhance transparency, a closing report released by the Agency explains its approach and the reasoning for its decisions.

While the investigations assessed that the behaviour of the MCAS and related alerting systems were the clear main cause of the two crashes, EASA rapidly realised that a far wider review of the 737 MAX was needed. EASA therefore extended its analysis to the entire flight control system. With a particular focus on the human factors – the actual experience for a pilot of flying the plane.

This extended review, conducted in close cooperation with FAA as primary certification authority, and with Boeing as manufacturer, continued to evolve over the course of the 20-month exercise. Its findings led to the definition of the broad package of actions specified in the Airworthiness Directive.

“The mandated actions need to be seen as a complete package which together ensure the aircraft’s safety,” Ky said. “This is not just about changes to the design of the aircraft: every individual 737 MAX pilot needs to undergo a once-off special training, including simulator training, to ensure that they are fully familiar with the redesigned 737 MAX and trained to handle specific scenarios which may arise in flight. This will be reinforced by recurrent training to ensure the knowledge is kept fresh.”

EASA has also agreed with Boeing that the manufacturer will work to even further increase the resilience of the aircraft systems to AoA sensor failures so as to further enhance the safety of the aircraft. Boeing will also conduct a complementary Human Factor assessment of its crew alerting system within the next 12 months, with the aim of identifying the need for longer term improvements.

Resumption of flights in Europe

The Airworthiness Directive, which details the aircraft and operational suitability changes, including crew training requirements, must be carried out before each individual plane returns to service, gives the green light from the EASA side for a return to service of the aircraft.

However, scheduling of these mandated actions is a matter for the aircraft operators, under the oversight of Member States’ national aviation authorities, meaning that the actual return to service may take some time. COVID-19 may also have an influence on the pace of return to commercial operations.

In conjunction with the Airworthiness Directive, EASA also issued a Safety Directive (SD) requiring non-European airlines which are holders of EASA third country operator (TCO) authorisation to implement equivalent requirements, including aircrew training. This will allow for the return to service of the 737 MAX when the aircraft concerned are operated under an EASA TCO authorisation into, within or out of the territory of the EASA Member States.

Additional information

In summary, the EASA Airworthiness Directive mandates the following main actions:

  • Software updates for the flight control computer, including the MCAS
  • Software updates to display an alert in case of disagreement between the two AoA sensors
  • Physical separation of wires routed from the cockpit to the stabiliser trim motor
  • Updates to flight manuals: operational limitations and improved procedures to equip pilots to understand and manage all relevant failure scenarios
  • Mandatory training for all 737 MAX pilots before they fly the plane again, and updates of the initial and recurrent training of pilots on the MAX
  • Tests of systems including the AoA sensor system
  • An operational readiness flight, without passengers, before commercial usage of each aircraft to ensure that all design changes have been correctly implemented and the aircraft successfully and safely brought out of its long period of storage.

For details, see the text of the Airworthiness Directive (AD).

EASA, and regulators in Canada and Brazil, worked closely with the FAA and Boeing throughout the last 20 months to return the plane safely to operations. These three authorities have already approved the aircraft for the return to service.

The EASA AD requires the same physical changes to the aircraft as the FAA, meaning that there will be no software or technical differences between the aircraft operated by the United States operators and by the EASA member states operators (the 27 European Union members plus Iceland, Liechtenstein, Norway and Switzerland). Following the exit of the United Kingdom from the European Union, the UK Civil Aviation Authority is now responsible for clearing the aircraft to operate to/from and within the U.K as well as for U.K. operators.

However, EASA’s requirements differ from the FAA in two main respects. EASA explicitly allows flight crews to intervene to stop a stick shaker from continuing to vibrate once it has been erroneously activated by the system, to prevent this distracting the crew. EASA also, for the time being, mandates that certain types of high-precision landings cannot be performed. The latter is expected to be a short-term restriction. The mandated training for pilots is broadly the same for both authorities.

Some EASA member states issued their own decision prohibiting the operation of the 737 MAX last year for their sovereign airspace. These bans will need to be lifted before the aircraft can fly again in the airspace of these countries.  EASA is working closely with the relevant national authorities to achieve this.

During the 28-day public consultation, comments on the AD were received from 38 commenters. These have all been responded to in the Comment Response Document published with the AD. For the SD, there were 6 commenters. Responses to these comments can be found on the Comment Response Document published with the SD.  In summary, the comments resulted in some minor changes to the texts, such as corrections to typing errors, updated document references and clarifications required by the commenters. There were no substantive changes made to the actions that need to be implemented.

Boeing reports fourth quarter and 2020 financial results

Boeing issued this report:

Fourth Quarter 2020

  • Financial results significantly impacted by COVID-19, 737 MAX grounding, and commercial wide body programs
  • 777X program recorded $6.5 billion pre-tax charge; first delivery expected in late 2023
  • 737 MAX began receiving regulatory approval to resume operations and restarted deliveries
  • Revenue of $15.3 billion, GAAP loss per share of ($14.65) and core (non-GAAP)* loss per share of ($15.25)

Full-Year 2020

  • Revenue of $58.2 billion, GAAP loss per share of ($20.88) and core (non-GAAP)* loss per share of ($23.25)
  • Operating cash flow of ($18.4) billion; cash and marketable securities of $25.6 billion
  • Total backlog of $363 billion, including more than 4,000 commercial airplanes
  • Strengthening safety processes, improving performance, managing liquidity and transforming for the future

Table 1. Summary Financial Results

Fourth Quarter

Full Year

(Dollars in Millions, except per share data)

2020

2019

Change

2020

2019

Change

Revenues

$15,304

$17,911

(15)%

$58,158

$76,559

(24)%

GAAP

Loss From Operations

($8,049)

($2,204)

NM

($12,767)

($1,975)

NM

Operating Margin

(52.6)%

(12.3)%

NM

(22.0)%

(2.6)%

NM

Net Loss

($8,439)

($1,010)

NM

($11,941)

($636)

NM

Loss Per Share

($14.65)

($1.79)

NM

($20.88)

($1.12)

NM

Operating Cash Flow

($4,009)

($2,220)

NM

($18,410)

($2,446)

NM

Non-GAAP*

Core Operating Loss

($8,377)

($2,526)

NM

($14,150)

($3,390)

NM

Core Operating Margin

(54.7)%

(14.1)%

NM

(24.3)%

(4.4)%

NM

Core Loss Per Share

($15.25)

($2.33)

NM

($23.25)

($3.47)

NM

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

The Boeing Company today reported fourth-quarter revenue of $15.3 billion, reflecting lower commercial deliveries and services volume primarily due to COVID-19 as well as 787 production issues, partially offset by a lower 737 MAX customer considerations charge in the quarter compared to the same period last year (Table 1). GAAP loss per share of ($14.65) and core loss per share (non-GAAP)* of ($15.25) reflected a $6.5 billion pre-tax charge on the 777X program and a tax valuation allowance, partially offset by a lower 737 MAX customer considerations charge. Boeing recorded operating cash flow of ($4.0) billion.

“2020 was a year of profound societal and global disruption which significantly constrained our industry. The deep impact of the pandemic on commercial air travel, coupled with the 737 MAX grounding, challenged our results. I am proud of the resilience and dedication our global team demonstrated in this environment as we strengthened our safety processes, adapted to our market and supported our customers, suppliers, communities and each other,” said Boeing President and Chief Executive Officer Dave Calhoun. “Our balanced portfolio of diverse defense, space and services programs continues to provide important stability as we lay the foundation for our recovery. While the impact of COVID-19 presents continued challenges for commercial aerospace into 2021, we remain confident in our future, squarely-focused on safety, quality and transparency as we rebuild trust and transform our business.”

The return to service of the 737 MAX in the U.S. and several other markets was an important step, and Boeing continues to follow the lead of global regulators and support its customers. Since the FAA’s approval to return to operations, Boeing has delivered over 40 737 MAX aircraft and five airlines have safely returned their fleets to service as of January 25, 2021, safely flying more than 2,700 revenue flights and approximately 5,500 flight hours.

Boeing now anticipates that the first 777X delivery will occur in late 2023. This schedule, and the associated financial impact, reflect a number of factors, including an updated assessment of global certification requirements, the company’s latest assessment of COVID-19 impacts on market demand, and discussions with its customers with respect to aircraft delivery timing.

The company continues to progress through its business transformation effort across five key areas including its infrastructure footprint, overhead and organizational structure, portfolio and investment mix, supply chain health and operational excellence. Boeing will continue these actions in 2021 to preserve liquidity, adapt to the new market, improve performance, sustain key investments and transform its business to be more productive, resilient and competitive for the long term.

Table 2. Cash Flow

Fourth Quarter

Full Year

(Millions)

2020

2019

2020

2019

Operating Cash Flow

($4,009)

($2,220)

($18,410)

($2,446)

Less Additions to Property, Plant & Equipment

($265)

($447)

($1,303)

($1,834)

Free Cash Flow*

($4,274)

($2,667)

($19,713)

($4,280)

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

Operating cash flow was ($4.0) billion in the quarter, reflecting lower commercial deliveries and services volume, as well as timing of receipts and expenditures (Table 2).

Table 3. Cash, Marketable Securities and Debt Balances

Quarter-End

(Billions)

Q4 20

Q3 20

Cash

$7.8

$10.6

Marketable Securities1

$17.8

$16.5

Total

$25.6

$27.1

Debt Balances:

The Boeing Company, net of inter company loans to BCC

$62.0

$59.1

Boeing Capital, including inter company loans

$1.6

$1.9

Total Consolidated Debt

$63.6

$61.0

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

Cash and investments in marketable securities decreased to $25.6 billion, compared to $27.1 billion at the beginning of the quarter, primarily driven by operating cash outflows partially offset by changes in the debt balance (Table 3).

Total company backlog at quarter-end was $363 billion.

Segment Results

Commercial Airplanes

Table 4. Commercial Airplanes

Fourth Quarter

Full Year

(Dollars in Millions)

2020

2019

Change

2020

2019

Change

Commercial Airplanes Deliveries

59

79

(25)%

157

380

(59)%

Revenues

$4,728

$7,462

(37)%

$16,162

$32,255

(50)%

Loss from Operations

($7,648)

($2,844)

NM

($13,847)

($6,657)

NM

Operating Margin

(161.8)%

(38.1)%

NM

(85.7)%

(20.6)%

NM

Commercial Airplanes fourth-quarter revenue decreased to $4.7 billion, driven by lower widebody delivery volume due to COVID-19 impacts as well as 787 production issues, partially offset by higher 737 deliveries and a lower 737 MAX customer consideration charge in the quarter compared to the same period last year (Table 4). Fourth-quarter operating margin decreased to (161.8) percent, primarily driven by a $6.5 billion pre-tax charge on the 777X program, lower delivery volume, and $468 million of abnormal production costs related to the 737 program, partially offset by a lower 737 MAX customer consideration charge.

Commercial Airplanes production rate assumptions reflect the continued impacts of COVID-19 on commercial demand, and the company will continue to assess them on an ongoing basis. The 737 program is currently producing at a low rate and expects to gradually increase production to 31 per month in early 2022 with further gradual increases to correspond with market demand. The 787 program plans to transition its production rate to 5 per month in March 2021, at which point 787 final assembly will be consolidated to Boeing South Carolina.

As discussed above, Commercial Airplanes now expects first delivery of the 777X to occur in late 2023 and has recorded a $6.5 billion reach-forward loss on the 777X program. Among the factors contributing to the revised first delivery schedule and reach-forward loss are an updated assessment of certification requirements based on ongoing communication with civil aviation authorities, an updated assessment of market demand based on continued dialogue with customers, resulting adjustments to production rates and the program accounting quantity, increased change incorporation costs, and associated customer and supply chain impacts. The production rate expectation for the combined 777/777X program remains at 2 per month in 2021.

Commercial Airplanes captured orders for 75 737 aircraft from Ryanair and eight 777 freighters from DHL, as well as a commitment for 23 737 aircraft from Alaska Airlines. Commercial Airplanes delivered 59 airplanes during the quarter, and backlog included over 4,000 airplanes valued at $282 billion.

Defense, Space & Security

Table 5. Defense, Space & Security

Fourth Quarter

Full Year

(Dollars in Millions)

2020

2019

Change

2020

2019

Change

Revenues

$6,779

$5,927

14%

$26,257

$26,095

1%

Earnings from Operations

$502

$34

1,376%

$1,539

$2,615

(41)%

Operating Margin

7.4%

0.6%

6.8 Pts

5.9%

10.0%

(4.1) Pts

Defense, Space & Security fourth-quarter revenue increased to $6.8 billion, primarily driven by higher volume on fighter programs and the rest of the portfolio as well as a charge on the Commercial Crew program in the same period last year (Table 5). Fourth-quarter operating margin increased to 7.4 percent reflecting more favorable performance on multiple programs compared with the same period last year, partially offset by a $275 million pre-tax charge on the KC-46A Tanker program primarily due to production inefficiencies including impacts of COVID-19 disruption.

During the quarter, Defense, Space & Security was awarded contracts for two KC-46A aircraft for Japan and AEW&C upgrades for the Republic of Korea Air Force. Defense, Space & Security achieved first flight of the MQ-25 unmanned aircraft with an aerial refueling store and demonstrated ski-jump launch capability of the F/A-18 Super Hornet for the Indian Navy. Also in the quarter, Defense, Space & Security completed engineering design review for the Wideband Global SATCOM-11+ communications satellite and critical design review of the Space Launch System Exploration Upper Stage for NASA.

Backlog at Defense, Space & Security was $61 billion, of which 32 percent represents orders from customers outside the U.S.

Global Services

Table 6. Global Services

Fourth Quarter

Full Year

(Dollars in Millions)

2020

2019

Change

2020

2019

Change

Revenues

$3,733

$4,648

(20)%

$15,543

$18,468

(16)%

Earnings from Operations

$143

$684

(79)%

$450

$2,697

(83)%

Operating Margin

3.8%

14.7%

(10.9) Pts

2.9%

14.6%

(11.7) Pts

Global Services fourth-quarter revenue decreased to $3.7 billion, driven by lower commercial services volume due to COVID-19 (Table 6). Fourth-quarter operating margin decreased to 3.8 percent primarily due to lower commercial services volume and $290 million of pre-tax charges related to asset impairments driven by COVID-19.

During the quarter, Global Services was awarded a Performance Based Logistics contract for the Republic of Singapore Air Force F-15SG fleet, secured a F-15 spares and logistics support contract with the Qatar Emiri Air Force, and was selected to provide P-8A training for the Royal New Zealand Air Force. Global Services also announced a 10-year digital services agreement with Frontier Airlines.

Additional Financial Information

Table 7. Additional Financial Information

Fourth Quarter

Full Year

(Dollars in Millions)

2020

2019

2020

2019

Revenues

Boeing Capital

$56

$37

$261

$244

Unallocated items, eliminations and other

$8

($163)

($65)

($503)

(Loss)/Earnings from Operations

Boeing Capital

$16

($58)

$63

$28

FAS/CAS service cost adjustment

$328

$322

$1,383

$1,415

Other unallocated items and eliminations

($1,390)

($342)

($2,355)

($2,073)

Other income, net

$122

$104

$447

$438

Interest and debt expense

($698)

($242)

($2,156)

($722)

Effective tax rate

2.2%

56.9%

17.5%

71.8%

At quarter-end, Boeing Capital’s net portfolio balance was $2.0 billion. The change in revenue from other unallocated items and eliminations was primarily due to the timing of eliminations for inter company aircraft deliveries. Other unallocated items and eliminations included a $744 million charge related to the previously announced agreement between Boeing and the U.S. Department of Justice in January 2021. Interest and debt expense increased due to higher debt balances. The fourth quarter 2020 effective tax rate primarily reflects an additional valuation allowance on certain deferred income tax assets, partially offset by the benefit of the five year net operating loss carry back provision in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Boeing announces fourth quarter deliveries

The Boeing Company announced today major program deliveries across its commercial and defense operations for the fourth quarter of 2020.

“Through the global pandemic, we took meaningful steps to adapt to our new market, transform our business and deliver for our commercial, defense, space and services customers in 2020,” said Greg Smith, Boeing executive vice president of Enterprise Operations and chief financial officer.

“The resumption of 737 MAX deliveries in December was a key milestone as we strengthen safety and quality across our enterprise. We also continued comprehensive inspections of our 787 airplanes to ensure they meet our highest quality standards prior to delivery. While limiting our 787 deliveries for the quarter, these comprehensive inspections represent our focus on safety, quality and transparency, and we’re confident that we’re taking the right steps for our customers and for the long term health of the 787 program. As we continue navigating through the pandemic, we’re working closely with our global customers and monitoring the slow international traffic recovery to align supply with market demand across our widebody programs. In 2021, we’ll continue taking the right actions to enhance our safety culture, preserve liquidity and transform our business for the future.”

Major program deliveries during the fourth quarter were as follows:

Major Programs

4th Quarter
2020

Year-to-
Date 2020

Commercial Airplanes Programs

737

31

43

747

3

5

767

10

30

777

11

26

787

4

53

Total

59

157

Defense, Space & Security Programs

   AH-64 Apache (New)

1

19

   AH-64 Apache (Remanufactured)

8

52

   C-40A

   CH-47 Chinook (New)

8

27

   CH-47 Chinook (Renewed)

3

   F-15 Models

1

4

   F/A-18 Models

6

20

   KC-46 Tanker

4

14

   P-8 Models

6

15

   Commercial and Civil Satellites

   Military Satellites

Note: Delivery information is not considered final until quarterly financial results are issued.

Boeing responds to FAA approval to resume 737 MAX operations

Boeing issued this statement (note: Boeing is no longer using the MAX term in the designation):

The U.S. Federal Aviation Administration (FAA) today rescinded the order that halted commercial operations of Boeing 737-8s and 737-9s. The move will allow airlines that are under the FAA’s jurisdiction, including those in the U.S., to take the steps necessary to resume service and Boeing to begin making deliveries.

“We will never forget the lives lost in the two tragic accidents that led to the decision to suspend operations,” said David Calhoun, chief executive officer of The Boeing Company. “These events and the lessons we have learned as a result have reshaped our company and further focused our attention on our core values of safety, quality and integrity.”

Throughout the past 20 months, Boeing has worked closely with airlines, providing them with detailed recommendations regarding long-term storage and ensuring their input was part of the effort to safely return the airplanes to service.

An Airworthiness Directive issued by the FAA spells out the requirements that must be met before U.S. carriers can resume service, including installing software enhancements, completing wire separation modifications, conducting pilot training and accomplishing thorough de-preservation activities that will ensure the airplanes are ready for service.

“The FAA’s directive is an important milestone,” said Stan Deal, president and chief executive officer of Boeing Commercial Airplanes. “We will continue to work with regulators around the world and our customers to return the airplane back into service worldwide.”

In addition to changes made to the airplane and pilot training, Boeing has taken three important steps to strengthen its focus on safety and quality.

  1. Organizational Alignment: More than 50,000 engineers have been brought together in a single organization that includes a new Product & Services Safety unit, unifying safety responsibilities across the company.
  2. Cultural Focus: Engineers have been further empowered to improve safety and quality. The company is identifying, diagnosing and resolving issues with a higher level of transparency and immediacy.
  3. Process Enhancements: By adopting next-generation design processes, the company is enabling greater levels of first-time quality.

Canada takes a different approach for the Boeing 737 MAX

Statement by Minister Garneau on Federal Aviation Administration’s certification of changes to the Boeing 737 MAX aircraft:

“Our government remains committed to keeping Canadians, the travelling public, and the transportation system safe and secure.

“We acknowledge that the United States Federal Aviation Administration (FAA) has released an Airworthiness Directive for the Boeing 737 MAX aircraft. Through this directive, the FAA is mandating its approved changes made to the Boeing 737 MAX aircraft, and confirms it can return to service in U.S. airspace.

“Transport Canada has worked extensively with the FAA and other key certifying authorities, including the European Union Aviation Safety Agency (EASA) and the National Civil Aviation Agency of Brazil (ANAC), as well as the three Canadian operators of the Boeing 737 MAX aircraft, and their pilot unions throughout the validation process of the aircraft to address all factors necessary toward a safe return to service of the aircraft.

“Transport Canada safety experts continue their independent validation process to determine whether to approve the proposed changes to the aircraft. We expect this process to conclude very soon. However, there will be differences between what the FAA has approved today, and what Canada will require for its operators. These differences will include additional procedures on the flight deck and pre-flight, as well as differences in training.

“The commercial flight restrictions for the operation of the Boeing 737 MAX aircraft in Canadian airspace remain in effect and will not be lifted until the department is fully satisfied that all its safety concerns have been addressed, and that enhanced flight crew procedures and training are in place in Canada.”

Poll:

FAA clears the Boeing 737 MAX to return to service

Federal Aviation Administration-FAA issued this statement today:

FAA Administrator Steve Dickson today signed an order (PDF) that paves the way for the Boeing 737 MAX to return to commercial service. Administrator Dicksons action followed a comprehensive and methodical safety review process (PDF) that took 20 months to complete. During that time, FAA employees worked diligently to identify and address the safety issues that played a role in the tragic loss of 346 lives aboard Lion Air Flight 610 and Ethiopian Airlines Flight 302. Throughout our transparent process, we cooperated closely with our foreign counterparts on every aspect of the return to service. Additionally, Administrator Dickson personally took the recommended pilot training and piloted the Boeing 737 MAX, so he could experience the handling of the aircraft firsthand.

In addition to rescinding the order that grounded the aircraft, the FAA today published an Airworthiness Directive (PDF) specifying design changes that must be made before the aircraft returns to service, issued a Continued Airworthiness Notification to the International Community (CANIC), and published the MAX training requirements. (PDF) These actions do not allow the MAX to return immediately to the skies. The FAA must approve 737 MAX pilot training program revisions for each U.S. airline operating the MAX and will retain its authority to issue airworthiness certificates and export certificates of airworthiness for all new 737 MAX aircraft manufactured since the FAA issued the grounding order. Furthermore, airlines that have parked their MAX aircraft must take required maintenance steps to prepare them to fly again.

The design and certification of this aircraft included an unprecedented level of collaborative and independent reviews by aviation authorities around the world. Those regulators have indicated that Boeing’s design changes, together with the changes to crew procedures and training enhancements, will give them the confidence to validate the aircraft as safe to fly in their respective countries and regions.  Following the return to service, the FAA will continue to work closely with our foreign civil aviation partners to evaluate any potential additional enhancements for the aircraft. The agency also will conduct the same rigorous, continued operational safety oversight of the MAX that we provide for the entire U.S. commercial fleet.

View a video from Administrator Dickson.

Photo: Joe G. Walker.