The operator introduces the first quarter 2024 earnings conference call for The Boeing Company. Matt Welch, Vice President of Investor Relations, welcomes everyone and introduces Dave Calhoun, President and CEO, and Brian West, CFO. Matt reminds listeners that the call is being recorded and can be followed on boeing.com. Dave Calhoun focuses his remarks on the actions taken since the Alaska Airlines accident in January, including taking responsibility, supporting investigations, and clearing the 737-9 fleet for service.

The company took immediate action to prevent another door plug depressurization event from happening, including holding quality standdowns, collecting employee ideas, and prioritizing areas for improvement. They engaged with the FAA and implemented a 90-day plan to improve quality throughout their production system. They also appointed new leaders and moved inspection and rework teams to Wichita, resulting in a reduction of nonconformances entering the Renton factory.

Boeing's quality control standards have been improving in their Wichita factory, resulting in more predictable and reduced cycle times. They are committed to reducing traveled work and improving their supply chain, despite short-term delivery shortfalls. The CEO plans to step down, but remains focused on ensuring confidence in Boeing's future. Demand for their products is strong and they expect to stabilize and improve performance by the end of the year. They will have largely delivered their inventory and their commercial, defense, and services units are expected to improve.

The company has learned important lessons over the last few months and years, and the team members take pride in their work and are committed to doing things the right and safe way. The total company financial performance for the quarter showed a decrease in revenue and a slight improvement in core loss per share due to lower 737 deliveries. Boeing Commercial Airplanes booked 125 net orders and delivered 83 airplanes in the quarter. The results were significantly lower than last year, primarily due to lower 737 deliveries and the impact of the 737-9 grounding. The company slowed production of the 737 to incorporate improvements to their quality and safety management systems.

Boeing is making continued efforts to improve production and deliveries of their 737 and 787 aircraft. They plan to increase production to 38 per month in the second half of the year, with further increases dependent on their work with the FAA. They currently have 110 737-8s in inventory, with plans to deliver most of them by the end of the year. The company is also working on resolving anti-icing issues and coordinating with customers to mitigate impacts to their fleet needs. Production of the 787 has been slowed, but they plan to increase it to 10 per month by 2026. They currently have 60 787s in inventory, with 40 requiring rework.

Boeing expects to complete the reworked airplanes and shut down the shadow factory by the end of the year, with most deliveries occurring in the same year. The 777X program is still on track for first delivery in 2025, pending FAA approval for certification flight testing. In the defense and space sector, BDS had $9 billion in orders and a backlog of $61 billion. Revenue was up 6% and operating margin improved, but losses on two fixed price development programs impacted first quarter results. The company's goal is to return to high single-digit margins by 2025-2026 through improved performance and tighter underwriting disciplines.

Boeing's defense portfolio continues to make progress, with notable updates on the MQ-25 program and the Starliner. The T-7A test aircraft completed climate lab testing and the overall defense portfolio is well positioned. Boeing Global Services had a strong quarter, with $5 billion in orders and a backlog of $20 billion. Cash and marketable securities ended the quarter at $7.5 billion, reflecting debt repayment and use of free cash.

Boeing's debt balance decreased to $47.9 billion as they paid down $4.4 billion of maturities due this year. They have access to $10 billion of revolving credit facilities, but are not yet able to provide a detailed outlook for 2024. Their 2024 free cash flow is expected to be in the low single-digit billions, with second quarter cash flow improving sequentially but still being a significant use of cash. They are committed to managing their balance sheet and prioritizing their investment-grade rating, while also monitoring their liquidity levels and considering opportunities to supplement their liquidity position. They remain confident in their ability to achieve $10 billion of free cash flow in the long-term, but this goal may take longer than originally planned due to their focus on safety, quality, and stability. Discussions with Spirit, a supplier, are ongoing and involve working through various terms and issues, including price, financing, and potentially divesting certain work for other customers.

The company is taking the time to ensure stability in its factories before making any deals. They have agreed to advance a large sum of money to Spirit and are focusing on ramping up production and meeting other objectives. The backlog of orders and talented employees give them confidence in long-term results. The MAX production output is sporadic and will continue to be so in the second quarter. The company is closely monitoring the number of clean fuselages from Spirit and working on those that did not go through the new inspection process.

Boeing CEO Dave Calhoun explains that the production of the 737 has been slow and lumpy due to quality issues, but they expect to resolve these issues within the next 60 days. They are encouraged by the progress and efficiency at their Wichita factory and will not rush the process. They are aiming to reach a rate of 50 a month by 2026 or 2027, which will be aided by the acquisition of Spirit and improvements in quality. Calhoun believes that reaching a rate of 38 in the near future will make it possible to reach 50 within the given timeframe.

The speaker is confident that the company will be successful in their bet, but their main focus right now is fixing issues at the Wichita facility. The production slowdown has led to late deliveries and the company expects some impact on margins, but they believe they will eventually return to higher levels.

Seth Seifman from JPMorgan asks about Boeing's cash balance and liquidity, mentioning the conventional wisdom that they should have $10 billion on hand. Brian West responds that they currently have $17 billion in liquidity and are focused on stabilizing their operations. He also mentions the possibility of additional funding to restore their cash balance and maintain their investment-grade credit rating. Sheila Kahyaoglu from Jefferies then greets the team.

In this paragraph, the speaker discusses the ongoing 737 disruption and how it is largely self-inflicted due to the company's decision to reduce traveled work. They also mention the 90-day timeline set by the FAA for a control plan to be implemented and how it will not automatically lead to an increase in production rates. The speaker expresses confidence in the control plan and its ability to monitor factory performance.

Noah Poponak asks how long it will take for Boeing to address product quality issues and increase production. Dave Calhoun responds that the most important factor is the pace of clean fuselages coming out of Wichita, and that discussions with the IAM are ongoing. He also mentions the engagement of a new workforce and the uncertainty of reaching an agreement before the deadline. He confirms that the $10 billion free cash flow target includes the IAM negotiation. Noah then asks for a timeline for addressing product quality and increasing production, to which Calhoun responds that it will likely take six months and that some work can be done while production increases. He also mentions that the second half of the year will look different from the first half.

Dave Calhoun is addressing concerns about the six-month window of time for Boeing to ramp up production. He clarifies that the six months refers to the first half of the year and that they have already begun actions to eliminate traveled work in the factory and improve productivity. The 30,000 ideas for continuous improvement will not delay the ramp-up process.

The company is focused on continuous improvement and has a timeline in place for various projects. They plan to disclose milestones to the investment community, with the most important being the number of clean fuselages received from Wichita. This will not affect the rate limits, but ensuring quality and stability in the supply chain is a priority. As a result, first half deliveries for the 737 may be under pressure.

The speaker, Dave Calhoun, and Brian West discuss the potential impact of the 737 MAX production and delivery slowdown on the supply chain. They mention a rate increase plan and the need to shore up any supply chain issues. They also mention the possibility of curtailment if the slowdown continues for too long, but state that they are focused on maintaining stability and positioning for future success. They believe they can handle any cash flow fluctuations and are focused on a near-term investment.

In this paragraph, Scott Deuschle asks Dave Calhoun about the supply chain performance for the 87 and any changes to the 777X ramp. Calhoun explains that there are two constraints affecting the 87, one being heat exchangers and the other being seat suppliers. He also mentions that the P-8 contract will not be discussed. Additionally, Brian West clarifies that there are no changes to the 777X ramp, but inventory implications are starting to be seen.

The company is facing working capital pressure due to a new project and will have lower production levels for the year. They are working on a recovery plan and are optimistic about the second line being activated. They are also in discussions for a deal with Spirit and will explore financing options to maintain their credit rating.

Dave Calhoun discusses the stability of their factory and their goal to reach optimal performance while maintaining their investment-grade credit rating. He also mentions their potential acquisition of Spirit and encourages them to resolve any issues quickly. There is a pending leadership change at Boeing, but the process in place is a good one and the Board is looking at all options.

The speaker discusses the possibility of an internal candidate being selected as the next leader and emphasizes the importance of making smart long-term decisions and getting development programs right. They also mention their support for the current internal succession plan and the need for the next leader to be prepared for long-term success. The last caller asks about the BDS segment and the speaker acknowledges the strong operating margins in the services business and the potential for sustaining them in the future.

The speaker discusses the progress of the company's services and defense contracts. They mention a project involving the integration of two distribution companies which is expected to improve margins. They also mention the retirement of risk on a program and the delivery of two airplanes.

In paragraph 23, the speaker discusses the progress of various development programs, including the T-7 and MQ-25. They mention that the T-7 is expected to complete its flight test program and the MQ-25 will reach an important milestone with the customer by the end of the year. The company has also signed a contract for 2 additional cost-type airplanes for the MQ-25, indicating a move towards derisking. The commercial crew program will also have a launch, further reducing risk. The Tanker program is showing good progress, but is impacted by efforts to reduce traveled work. Overall, the company is confident in their ability to work through these challenges and expects a high single-digit margin for BDS in the future.

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