The operator introduces the Boeing Company's third quarter 2023 earnings conference call, with Matt Welch, Vice President of Investor Relations, Dave Calhoun, President and CEO, and Brian West, CFO, in attendance. The call will be broadcast live over the internet and detailed financial information is included in the press release. Calhoun addresses the conflict in Israel and Gaza, expressing sadness and noting the company's focus on safety and aiding those in need. The company will follow the lead of the US government and coordinate with agencies, customers, and suppliers. Safety is the top priority.

The speaker discusses the challenges faced in the quarter but expresses confidence in overcoming them. They mention their financial goals and the importance of free cash flow. They highlight the success in the commercial sector with strong demand and significant orders. They also mention the focus on delivering airplanes and improving quality and stability in their production system. The speaker acknowledges the challenges in the supply chain and the need for caution in increasing production. They also mention ongoing work on the 737.

Boeing experienced a slowdown in production and deliveries in the quarter due to work issues, but expects to regain momentum and reach their delivery goal of 375-400 737s for the year. They are also on track to increase production rates for both the 737 and 787 models by 2025-2026. The focus is on liquidating inventory to improve margins, and they plan to deliver most, if not all, of the inventory by the end of next year. Progress is being made with China and supply chain performance is key. New leadership at Spirit Aerospace Systems, including Pat Shanahan, is expected to benefit Boeing.

Boeing has a strong partnership with a skilled employee and has reached a beneficial agreement to improve production. They are making progress on their commercial programs and are on track with their timelines. However, their defense and space sector is still facing challenges, with higher costs on the VC-25B and satellite programs. They are working to improve overall performance through various initiatives, but it will take time to see significant financial improvement at lower volumes.

Boeing is confident in the future of its BDS business despite slow recovery, thanks to key milestones and strong demand. The backlog at BDS is $58 billion, with 30% of it outside the US. Boeing Global Services had a strong quarter, driven by improved revenue and earnings, due to hitting key milestones and capturing new business. The services team represents Boeing with customers every day and their performance is best-in-class. Overall, demand for Boeing's products and services remains strong, with a backlog of $469 billion, including over 5,100 commercial airplanes.

In the next ten years, the markets Boeing serves are estimated to be worth $10.7 trillion. The company's products are in high demand and well-suited to meet customer needs. Despite facing challenges, Boeing remains confident in their ability to recover and will remain disciplined and patient in the process. In the third quarter, Boeing's revenue was $18.1 billion, up 13% from the previous year. The growth was driven by higher commercial volume, particularly from 787 deliveries. However, the company's core operating margin was -6% and core loss per share was $3.26 due to unfavorable defense performance, lower 737 deliveries, and expected expenses. Boeing Commercial Airplanes saw 398 net orders in the quarter, including orders for the MAX-10, 787s, and 737s. The backlog for BCA now stands at over 5,100 airplanes. BCA delivered 105 airplanes in the quarter and saw a revenue of $7.9 billion, with an operating margin of -8.6%. The lower 737 deliveries and increased R&D spending for the 777X contributed to this result.

In the third quarter, Boeing delivered 70 737 airplanes, but production and deliveries were impacted by a supplier fuselage nonconformance issue. This issue has also affected the delivery timeline for 250 MAX airplanes, with some expected to be delivered in 2025. The company plans to transition to 38 737s per month by year-end and increase to 50 per month by 2025-2026. On the 787 program, 19 deliveries were made in the quarter and production is transitioning to five per month in October and 10 per month by 2025-2026. The company expects most of the 75 787s in inventory to be delivered by the end of 2024. Abnormal costs of $244 million were booked, with a total estimate of $3 billion for the year. On the 777X program, efforts are ongoing.

The program timeline for Boeing is unchanged and they plan to resume production later this year. They have booked $180 million in abnormal costs and expect to be done this quarter. They have reached an agreement with Spirit on commercial terms for the 737 and 787 programs. Boeing Defense and Space booked $6 billion in orders and has a backlog of $58 billion. Revenue was flat year-over-year and they delivered 28 aircraft. Operating margin was lower than expected due to a $482 million charge on the VC-25B program and other cost pressures. The team is working to improve margins by 2025-2026.

The division is focused on driving lean manufacturing, program management rigor, and cost productivity. They have invested in new training programs and resources to support suppliers. They have also implemented tighter underwriting standards and have no plans to sign fixed price development contracts. The division has a solid core business and expects to see recovery in areas that have negatively impacted margins. They anticipate returning to strong performance levels in the next few years.

The remaining 15% of our portfolio consists of large fixed price development programs, which we are focused on maturing and retiring. Progress has been made on the KC-46A program, with 77 tankers delivered to the customer. The VC-25B program is also progressing, with key milestones of power on and first flight expected to be completed by 2025-2026. The commercial crew program is preparing for a successful crewed flight test next year and will fulfill operational launch commitments by 2025-2026. The T-7A and MQ-25 programs are also expected to reach key milestones by 2025-2026. Despite current challenges, we are confident that our actions will lead to a stronger recovery by 2025-2026, with a healthier order book and improved execution. In the next slide, we will discuss the strong performance of Boeing Global Services, with $5 billion in orders received during the quarter and a backlog of $18 billion.

The company's revenue increased by 9% due to favorable commercial volume and mix, with operating margins meeting expectations. They ended the quarter with $13.4 billion in cash and $52.3 billion in debt, with access to $10 billion in revolving credit facilities. The company's liquidity position is strong and they are focused on maintaining an investment grade credit rating. The overall financial outlook for 2023 remains unchanged, with expectations for $3-5 billion in free cash flow generation. The market for commercial and defense programs and services is strong, with global passenger traffic and cargo growth increasing. The company's portfolio and capabilities are well positioned to support the needs of the nation and their allies.

The company is facing strong demand and supply constraints, but is focused on improving performance and increasing production. They expect to see improvements in deliveries, revenue, margins, and cash flow by the end of the year. In early 2024, they anticipate reaching key milestones that will build momentum for the business, including stabilizing production for the 737 and 787, reducing inventory, and recovering in the BDS segment. They also expect to maintain strong liquidity and reduce debt in the coming year. Despite challenges, the company remains resilient in their recovery.

The speaker addresses common challenges in the industry, such as conformance issues and external obstacles, and assures that they are being addressed and resolved. They discuss the increase in quality processes and culture of transparency, leading to the identification and resolution of past issues. The speaker expresses confidence in the team and the long-term progress of the company, acknowledging the patience of the audience. The question and answer portion of the meeting begins, with the first question addressing the delay in ramping up 737 MAX production and potential bottlenecks.

The speaker is discussing the impact of the new leadership and agreement at Spirit on the ramp outlook for the MAX. They believe they are in sync with known constraints, such as engine constraints, and that the commercial agreement with Spirit will help them get ahead of their rate forecast. They also mention the importance of the new leader at Spirit in improving factory performance. The speaker acknowledges the constraints they have faced in the past few months and the thorough inspections that have been conducted on fuselages.

The speaker discusses the progress of their company and mentions that they are feeling more confident about their performance compared to other companies. They are capable of producing more than 50 units, but are limited by supply chain constraints. They plan to update their guidance in the early part of next year once they have resolved current issues and stabilized production at 38 units.

The speaker discusses the company's progress in achieving their cash flow goals and provides an update on their expectations for 2024. They mention that there have been some challenges in the defense business, but they are confident in hitting their target of $10 billion in cash flow by 2025-2026. The speaker also mentions that they expect to see higher BCA deliveries and progress on inventory wind down in the coming year.

The company is planning for stability in the future, with a focus on a $10 billion quantum in 2025-2026. They are currently focused on meeting their delivery goals for the remaining two months of the year, with a target of delivering high 30s or high 40s of 737s. They will provide more details in January.

The speaker asks about the confidence level for November and December and updates on the inspection of MAX aircraft in storage. They also ask if reaching a rate of 38 per month will affect rate break decisions for 2024. The response states that the team is focused on meeting the updated delivery numbers and achieving good free cash flow. The inspection of 75% of inventory airplanes remains unchanged, and the company has a master schedule to reach 50 per month by 2025-2026. The supply chain will also be coordinated accordingly. Another question is asked about the impact on rate break decisions, to which the response states that the plan to reach 50 per month remains unchanged.

Brian West addresses a question about the $10 billion target for 2025 and 2026. He explains that the space satellite constellation charge is a specific contract with a customer and is not a development project. He also mentions that the company has built in room for potential setbacks in reaching the target and remains confident in achieving it with contributions from BDS, BGS, and BCA.

Sheila Kahyaoglu asks about the operating loss in commercial airplanes and Brian West explains that it is largely due to the impact of the Spirit disruption. He expects the margins to improve in the fourth quarter, but it will still be negative. However, by 2024, they expect margins to be positive due to higher volume and the completion of the abnormal running through the BCA P&L. By 2025-2026, they anticipate double-digit margins with the help of the dual factories and the labor being applied to ramp up production rates. The BCA team is focused on meeting these targets.

During a conference call, Boeing's Brian West and Dave Calhoun addressed questions about the company's R&D spending and certification milestones for their 777X program. West explained that R&D spending has increased slightly due to investments in the 777X and 777-8 Freighter, but it will not impact their free cash flow target. Calhoun added that there have been no changes to the certification timeline for the 777X, but they are giving the FAA flexibility to make the final call.

The company is currently working on design assurance documentation as required by new legislation. The date for the release of the 777X is not yet determined, but will be dictated by regulators. The next question is about cash flow for 2023 and the potential for growth in 2024. The speaker cannot provide any specific information at this time, but will do so in January. The speaker also cannot provide details on deliveries, but expects them to be higher next year. The next question is about the 777X and the speaker cannot provide a specific date for its release. The company is waiting for regulators to dictate the specifics. The next question is about cash flow for 2023 and the potential for growth in 2024. The speaker cannot provide any specific information at this time, but will do so in January. The speaker also cannot provide details on deliveries, but expects them to be higher next year.

Noah Poponak asks Brian West about the 737 delivery pace and if the issues with the aft fuselage and inspection of fasteners will impact deliveries in 2024. West confirms that these issues will not impact deliveries and that they are working to get back to 38 deliveries per month. He also mentions that they are confident in November and December deliveries and that the underlying system will stay at 38. They will have to wait and see how things play out, but they are coordinating with the supply chain and are hopeful for a smooth delivery process.

The speaker is discussing the uncertainty surrounding the 2024 free cash flow and the factors that may affect it, such as the 737 disruption and 787 margins. They mention the need to first focus on resolving non-conformance issues and meeting delivery targets before discussing the specifics of 2024. They also mention their goal of reducing the number of return-to-service airplanes by the end of next year.

The pace at which the company completes rework and delivers airplanes will determine their cash flow. The company is focused on achieving this goal and will provide guidance on it. The company has not had to infuse cash into any other parts of the supply chain like they did with Spirit. The company expects both unit and program margins at BCA to be positive next year.

The speakers discuss the company's growth and upcoming plans, including an expected award for the tanker program and a potential increase in deliveries in the fourth quarter. They also address the impact of competition and the company's commitment to staying disciplined and maintaining financial stability.

The speaker, Brian West, thanks the operator for their assistance and informs the audience that The Boeing Company's Third Quarter 2023 Earnings Conference Call has ended. The audience is thanked for joining and instructed to disconnect.

This summary was generated with AI and may contain some inaccuracies.