The paragraph introduces the Boeing Company's Second Quarter 2024 Earnings Conference Call, with Matt Welch, Vice President of Investor Relations, and Dave Calhoun, President and CEO of Boeing, as the speakers. The call will be broadcasted live over the Internet and projections and estimates discussed involve risks. The company has also announced the appointment of Kelly Ortberg as Calhoun's successor, with the Board conducting an extensive search process. Calhoun expresses confidence in their selection and highlights Ortberg's 35 years of experience in the aerospace industry.

The speaker looks forward to working with Brian to ensure a smooth transition and discusses the progress the company has made in strengthening their safety and quality management systems. They have taken multiple steps to improve stability and deliveries, including slowing down and controlling travel work. The second quarter financial results reflect the ongoing recovery after the January accident. The company is committed to ensuring safety and predictability and has made meaningful progress towards that goal. They have established key performance indicators to monitor the health and quality of their production system and are seeing improved performance in these areas.

The article discusses the important elements of Boeing's plan, including control limits and investments in workforce training and quality culture. The transfer of fuselage inspection to Wichita has led to improvements in quality and flow times. Progress has also been made on development programs, such as the 737-7, -10, and 777X. The 777-9 has received type inspection authorization and is undergoing certification flight testing. An engineering solution has been identified for the engine anti-ICE system for in-production aircraft. The performance of Boeing Defense, Space & Security is also mentioned.

The results this quarter were disappointing, but the company remains optimistic about the long-term prospects of their defense business. They have maintained contracting discipline for future opportunities and Global Services continues to deliver solid results. The company has announced an agreement to acquire Spirit AeroSystems, which they believe is in the best interest of the flying public, their customers, and their employees. This acquisition will allow them to bring critical manufacturing work back within their company and unify their safety and quality management systems. The speaker thanks the employees for their dedication and resilience during this challenging time and expresses confidence in the company's future because of their passion and commitment.

Brian West discusses the planned acquisition of Spirit AeroSystems, which is expected to be completed in mid-2025 pending regulatory and shareholder approvals. The acquisition will include Boeing-related commercial operations and defense programs. West emphasizes the importance of safety and quality in this integration and highlights the company's commitment to aviation safety. In terms of financial performance, the company's revenue for the quarter was $16.9 billion, mainly due to lower commercial delivery volume.

In the second quarter, Boeing reported a loss of $2.90 per share due to lower commercial delivery volume and losses on fixed price defense development programs. Free cash flow was $4.3 billion, impacted by lower deliveries and unfavorable working capital timing. Boeing Commercial Airplanes delivered 92 airplanes and had a backlog of $437 billion. The Farnborough Airshow highlighted strong demand for their products, with over 150 orders and commitments. The 737 program delivered 70 airplanes in the quarter and production is expected to increase in the second half. The third line in the rented factory has been reactivated and production is gradually increasing. The factory is operating within safety and quality limits set by the FAA and production is being paced by fuselages from Wichita. Adjustments are being made to the master schedule and suppliers are being managed based on inventory levels.

The company's goal is to maintain a steady supply chain and deliver the majority of 90 737-8s built prior to 2023 by the end of the year. The inventory levels for the -7 and -10 models remain stable and certification timelines are on track. The 787 program experienced delays in production and deliveries, but plans to return to five planes per month by year-end. The rework of 35 airplanes built prior to 2023 is progressing and expected to be completed by year-end. The 777X program has obtained type inspection authorization and is undergoing FAA certification flight testing, with first delivery still expected in 2025. Inventory for Boeing Defense & Space increased by $800 million in line with previous trends.

During the quarter, BDS received $4 billion in orders, including a contract for seven MH-139 helicopters from the US Air Force. Revenue was $6 billion, down 2% due to fixed price development losses. The backlog ended at $59 billion and 28 aircraft were delivered, including the first CH-47F Block 2 Chinook to the US Army. Operating margin was negative at 15.2%, primarily due to a deliberate slowdown in production and additional fixed price development cost pressures. Despite disappointing results, BDS remains focused on retiring risk and delivering on mission-critical commitments to customers. The game plan to return to high single-digit margins in the medium to long term remains unchanged, with the core business performing well and strong demand for products.

In the second quarter, 25% of the portfolio was made up of fighter and satellite programs, which saw improved margin trends and delivered eight F-15EX aircraft to the US Air Force. The defense portfolio is well positioned for the long term and is expected to return to strong historical performance levels. Boeing Global Services also performed well, with $4 billion in orders and a backlog of $19 billion. They secured new contracts and maintained strong operating margins. The team is focused on profitable and efficient offerings and is expected to continue growing and generating high free cash flow.

Boeing ended the quarter with $12.6 billion in cash and marketable securities, with $10 billion coming from new debt issuance in May. They also have access to $10 billion in revolving credit facilities. The company is taking deliberate actions to improve safety and quality, but this may impact near-term cash flow. They expect third quarter to be another use of cash, but anticipate working capital to improve as deliveries and production stabilize. Due to operating leverage, free cash flow is expected to grow as deliveries ramp up. Boeing remains committed to managing the balance sheet to prioritize their investment grade rating and allow for the factory and supply chain to reset.

Boeing is actively monitoring its liquidity levels and will supplement its position as needed. They are confident that their business performance and capital structure will return to an investment-grade profile. They are currently focusing on ramping up production at their BCA factories for long-term stability. They are also working on shutting down shadow factories, derisking defense programs, and improving services. They have a positive outlook for the commercial market and expect the global fleet to double in the next 20 years. They are managing the business with a long-term view focused on safety, quality, and customer satisfaction. The production process for the 787 and 737 has led to an inventory build and difficulty with getting parts to China.

Brian West discusses the current state of production and inventory management at Boeing. He mentions that their delivery rates have been steadily improving, and they expect this trend to continue as they work towards stabilizing production. The third production line in Renton and resuming deliveries to China are key factors in this progress. Additionally, they have seen progress with the 787 despite supply chain constraints, and they are confident they will reach their goal of five deliveries per month by the end of the year. The main bottleneck in production has been fuselage deliveries from Spirit, but they have been making progress and the addition of a third production line will help alleviate this bottleneck.

Dave Calhoun and his team are closely monitoring the progress of their production, particularly with regards to their third line. They believe they will be able to reach a rate of 38 per month in the second half of the year. Dave adds that having a third line also allows for flexibility and helps with unforeseen issues. They have seen a step change improvement in their metrics since slowing down production. The key metric they are focusing on is traveled work, which has significantly improved.

The speaker discusses the positive impact of a recent change in their work process, which has led to a decrease in defects and a smoother production line. They mention the importance of keeping an eye on the amount of work in progress and ensuring it does not get out of control. The speaker also addresses questions about their cash flow and working capital, stating that the third quarter will have a similar drag as the first and second quarters due to lower deliveries.

The company is facing headwinds due to advanced timing and customers are applying excess advances and lowering advanced payments as they want to see delivery performance improve. This will gradually improve over time with deliveries, but it will take time for the factory to move and for all of the advances and inventory to unwind. In the third quarter, deliveries will be better, but there will still be working capital headwinds. In the fourth quarter, there will be stronger deliveries and real working capital improvement. The company is comfortable with their current cash balance and constantly monitoring liquidity. Some customers are deferring payments until performance improves, while others are using previous prepayments to cover current payments.

Boeing has experienced both over-collection and under-collection in the past, resulting in a decrease in advance balance. This is due to customers withholding payments until delivery schedules are more stable. However, the overall demand for airplanes remains strong, which provides an incentive for customers to pay and receive their planes. The $800 million increase in inventory is not offset by advances for the 777X, as the advance is not significant at this time.

Jason Gursky asks Brian West about the expected cash burn on the 777 program in the quarters leading up to certification and initial delivery. Brian responds that he cannot provide a specific number at the moment, but it will be significant as they ramp up deliveries. He also mentions that maintaining their investment grade rating is their top priority and they are in regular conversations with rating agencies to ensure this.

The speaker is discussing the impact of inventory on the company's financials and the outlook for the future, particularly in relation to the 777X program. They mention the robust backlog and confidence in the program, as well as the ongoing IAM labor negotiations and potential contingencies in case of a strike.

The speaker discusses their investments in training and development and their intent to avoid a strike. They also address the slow production and deliveries in July and August and their efforts to support their suppliers during this time.

The company is confident in their ability to improve delivery rates and reach their target of 38 planes per month by the end of the year. They are carefully managing their supply chain to ensure stability and predictability. There have been some minor changes in supplier advances, but nothing significant. The company does not anticipate needing to take any additional action to fund Spirit through the close of their transaction in mid-2025.

The speaker discusses the recent leadership decisions made by the company, including the hiring of Kelly as the new CEO. They mention that Kelly has a lot of experience in the industry but has been out of an operating role for a while. The speaker also mentions that the Board has been thorough in their discussions and has reached out to various individuals in the industry. They do not reveal any specific details about the potential impact of the leadership changes on ongoing transitions or the roles of other executives.

The speaker discusses the selection of Kelly for a leadership position at Boeing, expressing confidence in his experience and ability to support the team. They also mention the company's current recovery mode and the impact of inventory on their cash flow. The call ends with one final question from a participant.

During a conference call, Dave Calhoun was asked about the certification timing for the -7 and -10 variants of the MAX. He stated that the milestone is completing engineering work and passing certification tests, which they are confident will be done by the end of the year. They will then need to go through the test certification work before the planes can be certified. Calhoun believes a realistic timeframe for certification is the first half of 2025. The call concluded after this discussion.

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