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

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.”

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).

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

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

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 100^th U.S. Navy P-8A Poseidon, the 400^th V-22 Osprey, and the 2,500^th 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

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

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.

Boeing has reportedly decided to end production of the 747 according Bloomberg, ending a 50-year run.

The last 747-8 will be assembled in about two years.

Photos: Boeing.

Boeing 747 gallery and slide show.

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.

From the Seattle Times:

Boeing whistleblower alleges systemic problems with 737 MAX

Copyright Photo: Joe G. Walker.

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.

Boeing on May 11 completed another set of COVID-19 airlift missions, deploying three Dreamlifter aircraft to transport more than 150,000 protective eye goggles and face shields from China to the United States. Boeing worked in partnership with the Medical University of South Carolina (MUSC) to deliver the personal protective equipment (PPE) to frontline health care professionals in the MUSC system.

“Today’s delivery puts essential personal protective equipment in the hands of South Carolina’s frontline health care professionals and helps MUSC further support the community during the COVID-19 pandemic,” said Boeing President and CEO Dave Calhoun. “I am incredibly proud of our Boeing team members throughout the world for their work to help stop the spread of COVID-19 and thankful for our government and industry partners that have joined us in the pandemic response.”

The MUSC Health team will use the PPE as they support the revitalization of the economy and ramp-up COVID-19 community outreach efforts, including diagnostic testing and antibody testing, across South Carolina. MUSC Health, under the guidance of the South Carolina Legislature and in partnership with South Carolina Department of Health and Environmental Control (DHEC), has established mobile screening and collection sites in rural and underserved areas.

The mobile setup allows health care providers to rotate sites, reaching people experiencing barriers to health care access for COVID-19 screening. Rural and underserved communities have experienced disparities in access to COVID-19 screening, testing, prevention and treatment in South Carolina and across the U.S.

The MUSC Health team leading this effort were the first in the U.S. to launch a combined virtual urgent care platform and drive-through specimen collection site. They are now bringing a version of this successful model to the communities that need it most.

“On behalf of our entire MUSC family, I’d like to extend a heartfelt thank you to the Boeing team for helping to make today’s critical PPE shipment possible,” said MUSC President, David J. Cole, M.D., FACS. “These goggles and face shields will allow us to continue to expand our ability to test and monitor for COVID-19 as businesses and communities start to move forward. Increasing access to testing in the areas of greatest need throughout our state is an essential part of this work. We must continue to protect our most vulnerable populations. Boeing and MUSC have a longstanding partnership, and today’s delivery is yet another example of two great South Carolina institutions coming together in support of our local community.”

Similar to previous airlift missions flown by the Dreamlifter – a converted Boeing 747-400 Large Cargo Freighter – the medical cargo was transported in the lower lobe of all three aircraft, while 787 component parts were flown in the main deck cargo hold. Boeing donated the cost of the mission transport, with Atlas Air operating the flights on behalf of Boeing. Boeing has scheduled additional flights, to deliver a total of 400,000 units of PPE to MUSC, in the near future.

Boeing continues to support local communities and the heroic health care professionals working tirelessly to stop the spread of COVID-19. Boeing is coordinating closely with U.S. government officials on how to best assist areas with the greatest need.

Leadership Support

“We are grateful for the role Boeing continues to play in collaborating with our health care professionals to help ensure our frontline workers in the fight against COVID-19 have the equipment they need to stay safe while caring for our people.” – South Carolina Governor Henry McMaster

“I want to thank all those who worked so hard to ensure this shipment of critical PPE is arriving in Charleston today. Protecting our frontline health care workers, who put their lives on the line every single day, is absolutely essential, and this will help MUSC do exactly that.” – Sen. Tim Scott

“Our frontline health care workers have proven themselves to be the heroes of the crisis we are facing, and the folks at MUSC are a great example of that. I am immensely grateful for all the work they have done to care for South Carolinians. We’ve seen Americans rise to meet the immense challenges we are facing time and time again, and companies like Boeing are no exception. Thank you for ensuring that our frontline health care professionals have the necessary resources to fight this virus.” – Rep. Joe Cunningham (SC-01)

“I am grateful to the Boeing Dreamlifters for bringing PPE to MUSC. In this time of incredible uncertainty, I am thankful to see private and public organizations come together to help keep our community healthy and safe. As a native Charlestonian, I know firsthand that MUSC Health works hard to protect our families, especially now from the coronavirus, and they will continue to help our community recover from this pandemic. I appreciate Boeing for supporting such an important cause.” – Rep. Joe Wilson (SC-02)

“It’s incredible to see American companies rise to meet the numerous challenges our nation faces in this battle against COVID-19. I’m particularly proud of Boeing for airlifting personal protective equipment to South Carolina for the MUSC hospital system. MUSC Lancaster and MUSC Chester are two critical health care facilities in South Carolina’s 5^th Congressional District and I’m extremely grateful for them, as well as companies like Boeing who are working hard behind the scenes to support our nation’s health care efforts.” – Rep. Ralph Norman (SC-05)

“I’m grateful for the dedicated workers we have in South Carolina – from the manufacturing lines to the front lines – and today’s delivery is another example of how South Carolinians come together. Being able to expand our testing efforts at this level is critical in helping us tackle the COVID-19 pandemic and care for our community. Team work across industries and organizations demonstrates the spirit of our State. Thank you to everyone, especially MUSC and Boeing, who made today’s vital delivery possible.” – South Carolina State Senator Marlon Kimpson (District 42)

“Through the generosity and logistical might of Boeing, our local health care providers are receiving much needed equipment to keep them safe while they care for the most vulnerable in our community. We should all be inspired by the efforts of Boeing and their teammates, because together, all challenges can be met.” – North Charleston Mayor Keith Summey.

Photo: Boeing.

Boeing made this announcement:

The Boeing Company reported first quarter revenue of $16.9 billion, GAAP loss per share of ($1.11) and core loss per share (non-GAAP)* of ($1.70), primarily reflecting the impacts of COVID-19 and the 737 MAX grounding (Table 1). Boeing recorded operating cash flow of ($4.3) billion.

“The COVID-19 pandemic is affecting every aspect of our business, including airline customer demand, production continuity and supply chain stability,” said Boeing President and CEO David Calhoun. “Our primary focus is the health and safety of our people and communities while we take tough but necessary action to navigate this unprecedented health crisis and adapt for a changed marketplace.”

As the pandemic continues to reduce airline passenger traffic, Boeing sees significant impact on the demand for new commercial airplanes and services, with airlines delaying purchases for new jets, slowing delivery schedules and deferring elective maintenance. To align the business for the new market reality, Boeing is taking several actions that include reducing commercial airplane production rates. The company also announced a leadership and organizational restructuring to streamline roles and responsibilities, and plans to reduce overall staffing levels with a voluntary layoff program and additional workforce actions as necessary.

Boeing has also taken action to manage near-term liquidity, as it has drawn on a term loan facility; reduced operating costs and discretionary spending; extended the existing pause on share repurchases and suspended dividends until further notice; reduced or deferred research and development and capital expenditures; and eliminated CEO and Chairman pay for the year. Access to additional liquidity will be critical for Boeing and the aerospace manufacturing sector to bridge to recovery, and the company is actively exploring all of the available options. Boeing believes it will be able to obtain sufficient liquidity to fund its operations.

“While COVID-19 is adding unprecedented pressure to our business, we remain confident in our long term future,” said Calhoun.  “We continue to support our defense customers in their critical national security missions. We are progressing toward the safe return to service of the 737 MAX, and we are driving safety, quality and operational excellence into all that we do every day. Air travel has always been resilient, our portfolio of products and technology is well positioned, and we are confident we will emerge from the crisis and thrive again as a leader of our industry.”

• Financial results significantly impacted by COVID-19 and the 737 MAX grounding
• Revenue of $16.9 billion, GAAP loss per share of ($1.11) and core (non-GAAP)* loss per share of ($1.70)
• Operating cash flow of ($4.3) billion; cash and marketable securities of $15.5 billion
• Total backlog of $439 billion, including over 5,000 commercial airplanes

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

Team:

The global pandemic has changed the way we live and work. It is changing our industry. We are facing utterly unexpected challenges. But across the world you are demonstrating the resilience, commitment and generosity to one another, our customers and our communities that Boeing people are known for. I deeply appreciate all that you do.

And if COVID-19 has affected you directly — your health, your well-being, your loved ones or your colleagues — you have my sympathy and support.

The pandemic is also delivering a body blow to our business — affecting airline customer demand, production continuity and supply chain stability. The demand for commercial airline travel has fallen off a cliff, with U.S. passenger volumes down more than 95% compared to last year. Globally, commercial airline revenue is expected to drop by $314 billion this year.

As a result, airlines are delaying purchases for new jets, putting the brakes on delivery schedules and deferring elective maintenance. We’re also seeing a dramatic impact on our commercial services business, as grounded airline fleets decrease the demand for our offerings.

All of this puts near-term pressure on our cash flow. We’re taking steps to keep liquidity flowing through our business and supply chain. We’re reducing operating costs and discretionary spending, suspending dividend payments, extending our existing pause on stock buybacks, reducing or deferring R&D and capital expenditures, and accelerating some progress payment receipts with help from our defense customers. Our chairman and I are also foregoing our salaries for the year. And as you know, we’re exploring potential government funding options and advocating for access to credit for the entire aerospace manufacturing supply chain.

The aviation industry will take years to return to the levels of traffic we saw just a few months ago. We have to prepare for that. In today’s first-quarter earnings disclosure, we will be announcing a number of steps we’re taking to meet that new reality. Specifically, we will have to reduce commercial airplane production rates:

• We expect to resume 737 MAX production at low rates in 2020, gradually increasing to 31 planes per month during 2021, with gradual increases to correspond to market demand.
• We plan to reduce the 787 production rate to 10 per month in 2020 and to 7 per month by 2022, continuing to evaluate the rate after that.
• We also plan to reduce the combined 777 / 777X production rate to 3 per month in 2021 and take a measured approach to the 777X rate ramp.
• The 767 and 747 production rates will remain unchanged.

We have done a tremendous job of increasing our production rates and services offerings in recent years. But the sharp reduction in demand for our products and services over the next several years simply won’t support the higher levels of output.

We have worked hard to maintain the stability of our workforce, avoiding layoffs even through the grounding of the 737 MAX.

But these new reductions in our production rates and the continued impact of COVID-19 on our business will force us to reduce the size of our workforce. I’m sorry that I have to deliver this news, but I wanted you to hear it from me first — and I recorded a video message so you could hear it from me directly.

We have begun taking action to lower our number of employees by roughly 10% through a combination of voluntary layoffs (VLO), natural turnover and involuntary layoffs as necessary.

That is 10% in total for the enterprise. We’ll have to make even deeper reductions in areas that are most exposed to the condition of our commercial customers — more than 15% across our commercial airplanes and services businesses, as well as our corporate functions.

At the same time, the ongoing stability of our defense, space and related services businesses will help us limit the overall depth of the cut. And in the end, because there are so many unpredictable drivers for this crisis, we’ll have to monitor continuously what’s happening in our markets, and we will make adjustments whenever needed to ensure we’re matching the size of our business to the changing demand in the market.

I know this news is a blow during an already challenging time. I regret the impact this will have on many of you. I sincerely wish there were some other way.

Please know that we will do everything we can to minimize that impact, and as we take these steps, we will be as fair and transparent as possible — and absolutely honest and respectful.

The VLO program provides eligible team members with an opportunity to depart the company with a pay and benefits package. We also will provide support for those affected by involuntary layoffs, including severance pay, COBRA health care coverage and career transition services.

We are also making changes to start restructuring from the top so we’re ready for the new market reality — shrinking the size of my team by consolidating roles, simplifying processes and focusing accountabilities.

Please know this: Our industry and our company will get through this. Air travel has always been resilient over the long term, and our portfolio of products, services and technology is well-positioned for the recovery that will come.

And even as we deal with this crisis, we are pushing forward with our 2020 priorities:

• We are progressing toward the safe return to service of the 737 MAX in close coordination with the U.S. Federal Aviation Administration and global regulators.

• We’re making progress on our development programs, including the 777X, 737 MAX 10 and CST-100 Starliner.
• We continue to support our defense customers with progress across our future franchise programs, including MQ-25, T-7A Red Hawk, MH-139A Grey Wolf and our extra large unmanned undersea vehicle.
• Our Government Services business is growing as we earn new and follow-on business with our global defense customers, who look to us to support their fleet performance and mission readiness.
• We continue our work on the KC-46A tanker. The outcome of this month’s agreement with the U.S. Air Force on the tanker’s Remote Vision System means KC-46 will become the standard by which all future refueling aircraft are measured.

I’d also like to address the latest news about Embraer: We announced Saturday that we have terminated the agreement we had to establish a strategic partnership between our two companies. We worked diligently for two years to finalize the transaction — one that would have included commercial and defense joint ventures. But ultimately we could not come to a resolution around critical unsatisfied conditions for the deal under our Master Transaction Agreement (MTA). It is deeply disappointing, but we had reached a point where continued negotiation was no longer helpful, so we exercised the rights set out in the MTA to terminate the agreement.

Looking ahead, we will continue to concentrate on what is most important across Boeing. We will continue to invest in the future. We will continue to focus on our values, and to drive safety, quality, integrity and operational excellence in everything we do.

I am confident that we will get through this difficult period because I am confident in all of you. And I am proud to be one of you.

Please stay safe, stay strong, and continue to take care of yourselves and one another. Thank you for everything.

Dave