Q4 2024 Summary
Published Jan 28, 2025, 5:47 PM UTC- Boeing is making progress in increasing 737 MAX production rates, with the production system stabilizing and no constraints from the supply chain to ramp up to 38 airplanes per month, potentially leading to revenue growth and improved cash flow ,.
- The shutdown of costly shadow factories for both the 737 and 787 programs is expected to result in significant margin improvements at Boeing Commercial Airplanes starting in 2026, enhancing profitability ,.
- The 777X program is anticipated to begin generating positive cash flows starting in 2026 as deliveries accelerate, contributing to overall cash generation and returns on investment.
- Continued challenges and cost overruns in Boeing Defense & Space (BDS) fixed-price development programs are impacting financial performance and cash flow. The company recognized a $1.7 billion pretax charge in the quarter related to these programs and expects a significant cash outflow in 2025. Management acknowledged that stabilizing these programs has been difficult, and the timing to achieve breakeven or positive cash flow keeps getting pushed out. ,
- Supply chain issues, particularly in the 787 program, are causing delays and could impact deliveries. Boeing is facing challenges with seat certifications and heat exchangers for the 787, leading to delays in deliveries. Some completed aircraft are held up due to these issues, and management indicated that seat certifications, especially for new configurations, remain a significant challenge.
- Uncertainty around the ramp-up of 737 production rates and potential supply chain constraints. While Boeing aims to increase the 737 production rate above 38 per month, this is contingent on meeting key performance indicators (KPIs) and obtaining FAA approval. Management is not providing specific timelines and acknowledges that supply chain stability is critical for rate increases, leading to uncertainty around the production ramp-up. , ,
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +42% | The increase to $31,298 million was driven by higher commercial airplane deliveries, strong commercial market recovery, and improved service revenues. Supply chain stability also contributed, though lingering constraints remain a risk. |
Cost of Goods Sold | −13% | The drop to $16,831 million reflects lower abnormal production charges, better production efficiency, and fewer cost overruns on development programs. Over the long term, continued cost discipline is expected to support margins. |
Interest Expense | +12,500% | Surging to $755 million, largely due to new debt issuance at higher interest rates and refinanced debt structures. Rising global rates and elevated borrowing needs could pressure future profitability. |
Operating Income | Down from $1,829M to −$16,663M | Driven by reach-forward losses on major programs, production disruptions, and newly recorded cost overruns. Going forward, resolving supply chain issues and restoring stable production flows will be critical to rebuilding positive operating margins. |
Net Income | Down from $4,454M to −$19,797M | The swing to a substantial net loss stems from deeper operating losses, escalating interest expenses, and program charges in the quarter. The company’s strategic focus on cost management and delivery execution will be crucial to improving results. |
EPS (Diluted) | Down from $7.31 to −$31.27 | Primarily impacted by the net loss and higher share count from prior equity issuances. While further debt reduction and stable production may help improve EPS over time, near-term headwinds remain due to ongoing program and market challenges. |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
737 Production Rates | Q3 2024: Delayed ramp to 38 per month; emphasized safety, quality, and FAA approval before increases. • Q2 2024: Aiming for 38/month by year-end 2024, third line activation. • Q1 2024: Slowed below 38/month for quality improvements. | Restarted after strike, producing in low to mid-20s per month, targeting 38 per month in 2025 and 42 pending FAA KPIs. Focus on stability and supply chain readiness. | Continued cautious approach; production timelines extended, more disciplined ramp. |
787 Program & Supply Chain | Q3 2024: Rate of 4/month; seat certification and heat exchangers causing delays. • Q2 2024: Seat-related delays, working to reach 5/month by year-end. • Q1 2024: Slowed near-term; 13 deliveries, rework ongoing. | Producing at 5/month; goal to reach 7 in 2025. Facing heat exchanger constraints and seat certification delays. 25 airplanes in rework inventory. | Gradual rate increase; continuing supply chain and seat-integration hurdles. |
777X | Q3 2024: $2.6B pre-tax charge, delivery pushed to 2026. • Q2 2024: Certification flight tests underway, expecting first delivery in 2025. • Q1 2024: Also targeting 2025. | Inventory spend at $2.6B for 2024; first delivery in 2026, flight testing resumed. Heavy cash burn in 2025 before EIS. | Delivery timeline slipped from 2025 to 2026; greater emphasis on certification and cost management. |
Boeing Defense & Space Overruns | Q3 2024: $2B pretax charge on T-7A, KC-46A, etc. • Q2 2024: $1B loss on fixed-price contracts. • Q1 2024: Overruns of $222M on Tanker and T-7A. | Took a $1.7B pretax charge on fixed-price development programs (e.g., KC-46A, T-7A). About one-third hits near-term cash flows. Seeking to stabilize key programs. | Persistent cost overruns, but leadership aiming for break-even on troubled contracts. |
Cultural & Operational Challenges | Q3 2024: Top-down culture shift needed; business stabilization emphasized. • Q2 2024: Not specifically mentioned. • Q1 2024: Quality standdowns and employee engagement. | Rebaseline of core values and behaviors planned in 2025; continued push for accountability. Improved training post-strike. | Ongoing emphasis on cultural transformation, operational discipline. |
Labor Negotiations & Disruptions | Q3 2024: Strike significantly affected 737/787 production, deliveries, and 777X timeline. • Q2 2024: Committed to avoiding a strike but no contingency specifics. • Q1 2024: Productive talks, $10B FCF target included potential impact. | IAM work stoppage ended but contributed to a core loss and schedule delays. Incurred charges on 777X and 767. | Resolved strike, but major financial and production disruptions linger. |
Free Cash Flow & Working Capital | Q3 2024: Usage of $2B, better than expected advances. • Q2 2024: $4.3B usage, anticipating Q4 improvement. • Q1 2024: $3.9B usage, focus on back-end loaded 2024. | Usage of $4.1B this quarter. Expects net usage in early 2025, improving in second half. Inventory at $87.5B to be unwound. | Continuing cash burn with optimism for recovery as production stabilizes. |
Acquisition of Spirit AeroSystems | Q3 2024: Deal “still expected to close” in 2025. • Q2 2024: All-stock transaction (~$4.7B) expected mid-2025. • Q1 2024: Ongoing talks, advancing $425M to Spirit. | Not mentioned as an acquisition; rather, continued integration efforts with Spirit. | No longer referenced as a pending acquisition in Q4, suggesting shift in strategy or indefinite delay. |
Shutdown of Shadow Factories | Q3 2024: Delayed due to IAM strike, extending into next year. • Q2 2024: On track for year-end closure. • Q1 2024: Expected to shut down both 737/787 shadow factories by end of 2024. | 737 shadow factory to close by mid-2025, 787 rework done early 2025 but deliveries flow into 2026. Cost improvements expected post-shutdown. | Extended timelines due to strike and operational delays; closure still moving forward. |
Seat Certification (787) | Q3 2024: Seat certifications and heat exchangers delaying 787 deliveries. • Q2 2024: Seat delays cited. • Q1 2024: Not mentioned. | Ongoing seat and monument certification issues (code 1s), causing delivery delays for some carriers. Boeing spreading out new seat configs to mitigate. | Continued challenge, affecting customer deliveries and needing more regulatory time. |
Portfolio Streamlining | Q3 2024: Focus on core businesses; possible divestitures (e.g., Jeppesen). • Q2/Q1 2024: Not mentioned. | Confirmed portfolio review; possible pruning of non-core assets, not a major restructuring. Decisions over the next year. | New emphasis on strategic focus and potential divestitures since Q3. |
Balance Sheet & Capital Raises | Q3 2024: Considering new offerings; universal shelf registration. • Q2 2024: Focus on protecting investment-grade rating. • Q1 2024: $17B in liquidity; potential supplemental funding. | Raised $24B in October; repaid $3.5B bond early. Maintaining $10B in revolver capacity. Will evaluate more funding as needed. | Proactive debt repayment and cash-raising measures to preserve credit rating. |
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Free Cash Flow Outlook
Q: What's the 2025 free cash flow outlook and key drivers?
A: Free cash flow in 2025 remains consistent with earlier guidance, adjusted for higher CapEx due to growth programs and a few hundred million impact from updated BDS charges. The first half will be negative, the second half positive, with net usage for the year. Positive momentum exiting 2025 sets us up nicely for 2026. -
BDS Fixed-Price Program Charges
Q: How are you managing BDS fixed-price programs, and when will they break even?
A: We're actively working with customers, especially the U.S. Air Force, to de-risk programs through agreements converting to contract changes. About one-third of the $1.7 billion charge will impact cash flow over the next three years, front-end loaded. BDS cash flow in 2025 will resemble 2023, with breakeven possible in 2026 or 2027. -
737 MAX Production Ramp
Q: What's needed to reach and exceed 38/month on the 737 MAX?
A: Confident in ramping up to 38 per month, with no current constraints from the supply chain. Six KPIs agreed with the FAA measure production stability; early indications are positive. We'll request higher rates only when KPIs support it. -
BCA Margin Outlook
Q: When will BCA margins turn positive, and what's the long-term outlook?
A: BCA margins will be negative in 2025 but less so as we progress, improving in 2026. The IAM agreement adds cost less than 5% of the airplane. Long-term margins won't be disrupted due to productivity gains from eliminating shadow factories and production ramp-up. -
Supply Chain Challenges
Q: How is the supply chain impacting production ramp-up?
A: Supply chain readiness is crucial for rate increases beyond 38/month. We're focusing on commodities with long lead times like forgings and castings. Open communication with suppliers ensures capacity investments are made. -
777X Cash Flow and Delivery
Q: What's the pace of 777X inventory liquidation post-EIS?
A: Expect heavy cash usage in 2025 before EIS. Initial deliveries in 2026 will be change incorporation aircraft with low cash flow, but free cash flow will accelerate in 2027 as deliveries ramp up. -
787 Deliveries and Constraints
Q: Are 787 delivery targets achievable despite supply constraints?
A: Aiming for 75-80 deliveries in 2025, possibly more. Challenges with seat certifications, especially new configurations, but we're working through them. Heat exchanger issues are improving. -
T-7A Program Cost Overruns
Q: What's causing T-7A cost overruns, and how are you fixing it?
A: Fixed-price development with large fixed-price production without supply chain agreements led to cost creep. Working with the Air Force to eliminate concurrency risk and adjust acquisitions. We've learned and won't repeat this approach. -
Portfolio Review
Q: Are you considering divestitures like Jeppesen?
A: Completed a detailed portfolio review, identifying areas not core. We'll prune the portfolio over coming months and years but no major restructuring is planned. -
Shadow Factories Wind-Down
Q: How does winding down shadow factories affect cash flow?
A: Shadow factories for 787 and 737 will wind down early this year and midyear, respectively. Labor is moving to first-run production, improving BCA margins over time. -
Inventory Levels
Q: How much cash is tied up in inventory?
A: We're holding $87.5 billion in inventory, which will begin to liquidate as deliveries accelerate, benefiting cash flow over the next couple of years. -
X66 Development Program
Q: What's the significance of the X66 aircraft program?
A: The X66 is an important, challenging technology development program with NASA, exploring new technologies for future aircraft. It's exciting and could influence our next airplane. -
Production Rate Timing
Q: When will you reach 38 and 42 per month production rates?
A: We'll increase rates when KPIs indicate readiness; not providing exact timing yet. Aiming to get to 42 per month sometime towards the end of the year after approval.