Boeing posts massive charge for 787 Dreamliner problems, sending losses soaring
![<i>LUC OLINGA/AFP/Getty Images</i><br/>Planes are seen under construction at a Boeing assembly plant in North Charleston](https://abc17news.b-cdn.net/abc17news.com/2022/01/hypatia-h_efa8750ee71c6236e628b3c3bdaad225-h_ba5da5bbd65493518d51a6f02df81cb5-300-scaled.jpg)
Planes are seen under construction at a Boeing assembly plant in North Charleston
By Chris Isidore, CNN Business
Boeing took nearly $4 billion in charges related to problems it had with its 787 Dreamliner, causing losses to soar for the third straight year.
The company had already been hit with the problems surrounding the 737 Max, which was grounded for 20 months starting in 2019 following two fatal crashes. Demand then plunged for new aircraft because of massive airline losses caused by the pandemic.
Boeing has essentially been unable to deliver the widebody 787 jet for a year because of quality control issues.
The company said it will have to pay $3.5 billion to compensate customers for the delayed deliveries. It delivered only 14 of the jets in 2021, and none since June. It also said the delays would increase the costs of producing the plane by an estimated $2 billion, with most of those costs coming at the end of this year. It booked $285 million of those increased costs in the just completed quarter.
“We are progressing through a comprehensive effort to ensure every airplane in our production system conforms to our exacting specifications. This effort continues to impact our deliveries and our financial results — but we are fully confident it is the right thing to do,” said Boeing CEO Dave Calhoun in a memo to employees Wednesday. “While we never want to disappoint our customers or miss expectations, the work we’re putting in now will build stability and predictability going forward.”
The charges caused the company to report a net loss of $4.3 billion for the year, which is actually an improvement from the $11.9 billion it lost in 2020. Its core loss, excluding special items, came to $4.1 billion for the year, reversing a narrow profit on that basis in the first nine months of 2021. It’s a core quarterly loss on that basis of $4.5 billion. That was far worse than analysts had forecast.
The quarterly results did include some good news for Boeing. The company had a positive cash flow for the first time since the first quarter of 2019, the period in which problems with the 737 Max started.
“We have been focused relentlessly on improving our free cash flow situation” Calhoun told investors on a conference call Wednesday. “It has been our #1 metric. And to be able to achieve that, I think, is terrific news.”
The Max grounding and the onset of the pandemic caused the company to burn through cash. The Max eventually cost Boeing more than $21 billion in documented costs and led to more than 1,000 canceled orders for the jets that sharply reduced its revenue.
So problems with the 787 Dreamliner were the last thing the company needed. The delivery and quality issues are not the only headwinds for the plane.
Built with innovative lightweight carbon fiber instead of aluminum for much of its fuselage, the Dreamliner was designed mainly for long-haul international routes. But international travel is the sector of the airline industry expected to be the last to recover from the ongoing pandemic downturn. Orders for the jet fell to just 21 in 2021, down from 113 in 2019.
“We are taking the time now to ensure we’re positioned well as widebody demand recovers,” said Calhoun in his memo to employees.
Boeing shares fell nearly 4% in Wednesday morning trading on the results, even as broader US stock indexes rallied ahead a much anticipated meeting of the Federal Reserve.
Company executives tried to assure investors Wednesday that in the scheme of things the problems with the 787 are temporary.
“While this hurts in the near term, we still believe it’s the right thing to do because long term, we’re going to sell a lot of these 787s for decades,” said CFO Brian West. “So we’ve just got to work our way through this.”
Several airlines have said they expect Boeing to begin deliveries of the 787 this spring, perhaps in April. But company executives repeatedly declined to give a target date for the deliveries, saying it was up to the Federal Aviation Administration. During the 737 Max grounding, the company repeatedly missed target dates for when it expected to gain approval for the plane to fly again. It’s clear that Boeing does not want to repeat that mistake.
“I don’t want to get ahead of anybody with respect to speculating the day we pick it,” said Calhoun. “That’s up to the FAA, and we’re going to let them do what they have to do.”
The-CNN-Wire
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