The article begins with an introduction to Boeing Company's First Quarter 2025 Earnings Conference Call. The operator notifies participants that the call is recorded and broadcast live online, with a session for analyst questions. Matt Welch, Boeing's Vice President of Investor Relations, introduces the call, mentioning the availability of the webcast, earnings release, and presentation on their website, while noting the discussion will include forward-looking statements subject to risks. Kelly Ortberg, Boeing's President and CEO, reports a successful quarter, expressing confidence in the company's recovery plan and highlighting progress in their safety management system and production stability, with 130 airplanes delivered surpassing expectations.

The paragraph outlines the company's cautious approach to scaling operations, emphasizing improved performance in their fixed price development programs and the success of winning the F-47 program. This win secures their position in the fighter market for the future. The business achieved a milestone in freighter conversions, and their recovery plan focuses on stabilizing the business, improving program execution, changing culture, and building their future. Financial stability is a priority, with efforts including a recent equity raise and an expected cash boost from divesting parts of their digital aviation solutions. Key to their cash flow is increasing the production of the 737 MAX, with plans to gradually scale up production and seek regulatory approval for further increases.

The paragraph discusses improvements and developments in production and quality within the aerospace company. It notes significant reductions in traveled work and rework hours on the 737 line, showcasing improvements in quality systems. The 787 production remains strong, moving towards increased rates, contingent on stable production indicators. Challenges persist with seat certification possibly affecting deliveries throughout the year. The company's positive cash balance and production ramp are helping stabilize the business, despite tariff issues. Additionally, efforts to enhance development program execution continue, with milestones achieved in the T7 program and ongoing work with the customer on the VC-25B program to expedite delivery while focusing on safety and quality.

The paragraph outlines Boeing's recent activities and future plans. It highlights the transfer of the MQ-25 aircraft to a new production facility in Illinois for final assembly, followed by ground and flight tests. Boeing seeks to baseline its F-47 plan performance next quarter. The FAA has authorized expanded 777X flight test activities, and both the 777X and 737 models continue their certification programs without timeline changes. Boeing is also working on culture change, having conducted employee meetings and surveys to refresh its values and behaviors, and plans to incorporate these into its performance management and leadership processes. Finally, the company is streamlining its portfolio by planning the divestiture of parts of its digital aviation solutions business.

The paragraph discusses Boeing's strategic focus and the current tariff environment affecting their operations. It outlines the impact of input tariffs and potential retaliatory tariffs on manufacturing costs and aircraft deliveries, particularly emphasizing issues with deliveries to China due to tariffs. Boeing notes that while tariffs on components from countries like Japan and Italy are affecting costs, these may be recovered for aircraft exported. The company is managing its operations amidst these challenges, with approximately 50 deliveries to China planned for the remainder of the year, despite uncertainties.

The paragraph discusses Boeing's response to challenges with Chinese customers regarding airplane deliveries. The company is actively working to reallocate these planes to other eager customers and to manage production flow despite uncertainties with China. Boeing has implemented a conservative recovery plan to mitigate risks such as tariffs and continues to collaborate with the U.S. administration on industry-related issues. Additionally, the paragraph acknowledges the hard work of employees, mentions the transition of Matt Welch to a new role as BCA CFO, and hands over to Brian West to discuss the company's quarterly financial performance.

The article reports a revenue increase to $19.5 billion, driven by higher commercial deliveries, with a core loss per share of $0.49 showing improvement from the previous year. Free cash flow usage was $2.3 billion, better than expected, due to improved working capital timing. Only tariffs as of March 31st were included, having no significant impact. Boeing Commercial Airplanes (BCA) delivered 130 airplanes, generating $8.1 billion in revenue with a -6.6% operating margin, influenced by increased deliveries and reduced costs. BCA received 221 net orders, with a backlog rising to $460 billion, indicating over seven years of production. The 737 program delivered 105 planes, with March's monthly production in the low 30s, and aims to reach 38 per month soon. Improved fuselage quality and flow are highlighted, with a deal closure expected mid-year, and supplier schedule management continues based on inventory.

Over the past year, the buffer inventory has increased to stabilize the production system, and the plan is to return it to normal levels as production stabilizes and rates increase. There are currently about 37 737-8 aircraft built before 2023, with 25 designated for customers in China. The rework on these airplanes is expected to be completed, and the shadow factory shut down by mid-year. The 7 and 10 inventory remains stable at around 35 airplanes. The 787 program delivered 13 airplanes in the quarter, with production stabilizing at five per month. There are about 20 787 airplanes built before 2023 requiring rework, and half are expected to be delivered this year. The 777X program made progress in its certification timeline, receiving FAA approval to expand flight testing, with first delivery expected in 2026. Inventory for the 777X increased by approximately $800 million and will continue to grow. Additionally, BDS booked $4 billion in orders during the quarter, with a backlog of $62 billion, and was selected by the U.S. Air Force for the next-generation fighter aircraft, the BF-47.

The paragraph reports on the financial and operational performance of the company in the first quarter. Revenue was $6.3 billion, a 9% decrease due to planned lower volume, but operating margin improved slightly to 2.5%. The company aims to increase BDS margins to high single digits over time, emphasizing its strong core business that constitutes 60% of revenue and achieving mid to high single-digit margins. The demand for fighter and satellite programs, which make up 25% of the portfolio, remains strong, showing improved operational performance. The remaining 15% of revenue comes from fixed-price development programs, which are stabilizing. Key milestones were met, including the MQ-25 program's assembly progress and the T-7A's performance milestones with the U.S. Air Force. The company remains focused on stabilizing operations and reducing risks to deliver critical capabilities.

The defense portfolio is well-positioned for future growth and is expected to return to historical performance levels through stabilized production and new contracts. BGS performed well, with $5 billion in orders and a $22 billion backlog, stable revenue of $5.1 billion, and an improved operating margin of 18.6%. The business delivered the 100th Boeing 767-300 converted freighter and secured a U.S. Air Force contract. Cash and marketable securities stood at $23.7 billion, while debt decreased to $53.6 billion. The company aims to maintain an investment-grade rating and stabilize the factory supply chain. Additionally, an agreement was made to sell parts of the digital aviation solutions business for $10.55 billion to focus on core operations and strengthen the balance sheet.

The paragraph discusses the macroeconomic context affecting the aerospace industry, emphasizing the importance of free trade policies and U.S. manufacturing jobs. The company relies heavily on U.S.-based suppliers and is working to address supply chain and cost pressures. On the demand side, 70% of commercial deliveries are intended for international customers, with China accounting for about 10% of the backlog. Despite potential disruptions in China, the company has a large, diverse backlog and plans to increase production rates. The company set a conservative free cash flow plan and is prepared to counteract potential impacts from China-related issues and increased tariff costs. They plan to deliver around 50 airplanes to China but are considering alternative plans for 41 planes already built or in production.

The paragraph discusses the current tariff situation impacting the aviation industry, specifically highlighting concerns about potential tariff-related pressures beyond China. The company's markets remain strong, as evidenced by a substantial backlog, and they are confident in managing long-term business fundamentals. The speaker thanks Matt Welch for his leadership and introduces Eric Hill as a new leader. During the Q&A, Doug Harned from Bernstein questions the negotiation efforts to maintain a zero-tariff environment across the Atlantic for aviation, which were effective under the first Trump administration. He asks about current interactions with Washington and expectations for tariff developments in the U.S., Europe, and China. Kelly Ortberg acknowledges the significance and dynamic nature of the topic, noting its importance.

The paragraph discusses the engagement of the company, possibly in the aviation industry, with the U.S. administration to address concerns about potential tariffs, emphasizing the importance of aircraft to the U.S. trade surplus. The current issue with China is seen as a short-term challenge that could affect the company's recovery and stability in production. The company is committed to resolving this either by negotiating settlements with China or by finding ways to re-market the airplanes. While there is hope for negotiated agreements, the timing is uncertain, and the company is preparing to take necessary actions to mitigate any negative impacts on their recovery.

The paragraph discusses the current state and future expectations of aircraft deliveries amid international trade challenges. The speaker mentions the ongoing issues with China and the desire for a non-tariff environment with the EU and other international partners. Regarding aircraft deliveries, the speaker confirms expectations for the delivery of around 400 Boeing 737s and 80 Boeing 787s despite some planes being impacted by the situation with China. Operationally, they've had a strong start to the year, and they anticipate maintaining delivery targets, particularly with plans to ramp up production of the 787 to seven planes per month in the coming months. The delivery expectations for the second quarter are slightly higher compared to the fourth quarter of 2024.

The paragraph discusses the impact of tariffs on production costs and the measures being taken to manage them. It mentions the duty drawback opportunity, where tariffs paid for products delivered outside the U.S. can be recovered, though this creates a temporary cash flow issue. The challenge is also highlighted for suppliers who deliver products within the U.S. and thus cannot recover tariffs, necessitating active supply chain management to address potential cost pressures from suppliers looking to pass on tariff-related surcharges.

The paragraph discusses the management of increased tariffs and their impact on the supply chain and production costs. The company is exploring options like allowing suppliers to benefit from their duty drawback processes, despite some suppliers indicating potential price increases. The focus is on ensuring supply continuity rather than debating tariff costs. Brian West outlines the financial impact, noting that the increased tariffs on input costs are manageable and within the company's plans, amounting to less than $500 million annually. The company benefits from pre-tariff inventory levels, hedging strategies, and duty drawback opportunities, with a seasoned global trade team adept at handling such issues. Overall, the tariffs are manageable, posing no significant concern.

The paragraph discusses a company's financial outlook and production plans. The speaker, Brian West, explains that while the company anticipates a free cash flow usage of $4 billion to $5 billion for the year, they expect the second quarter to be similar to the first. However, they predict that free cash flow will become positive and accelerate in the second half of the year due to increased production and delivery of 737 and 787 airplanes and favorable customer receipts. Some costs and challenges may offset these gains, but the overall outlook is optimistic.

The paragraph discusses the company's plans and outlook for production rate increases amid uncertainties, particularly related to China and tariffs. Despite these uncertainties, they are confident in their demand and production plans, attributing this to a strong backlog of over $0.5 trillion. They plan to increase production rates incrementally, starting from 38 aircraft per month to 42, with subsequent increases in five-per-month increments, spaced at least six months apart. The company is monitoring the situation and maintains that its annual goals are still on track even though the China situation might require some adjustments.

The paragraph discusses the stability and future plans for production rates and key performance indicators (KPIs) for the 787 aircraft. It mentions the intention to maintain stable KPIs while increasing production rates, and notes that all current KPIs for the 787 are positive. There are plans to increase production rates in the coming months and expand production capacity at the Charleston facility. On the supply chain side, there is sufficient inventory and alignment with key suppliers to support these rate increases, despite needing to address tariff-related issues. In response to a question from Scott Mikus, Kelly Ortberg congratulates on an F-47 win and addresses a query about the pricing structure of options for the EMD phase and LREP, although the paragraph cuts off before providing a detailed answer.

In the paragraph, Kelly Ortberg addresses questions about the progress of key performance indicators (KPIs) for the 787 and 737 MAX aircraft. He notes that a previous issue with the 787's KPI related to final ticketing has been resolved and is now performing well. Although there is still some rework needed on inventory aircraft from before a strike, progress is being made. For the 737 MAX, there is still some work to be done on rework KPIs, but improvements are aligning with the plan. Overall, Ortberg expresses confidence that as production increases, all metrics will meet targets. Additionally, he mentions avoiding the risks associated with past fixed-price programs.

The paragraph discusses the positive outlook and progress of a company in addressing challenges and increasing production rates. The speaker highlights that things are looking good, and there is alignment on achieving rate increases. Despite issues such as a fire affecting suppliers, the team has handled the situation well, finding alternative solutions to prevent delays in aircraft programs. There is a focus on managing capacity diligently as production ramps up. During a Q&A, Noah Poponak from Goldman Sachs asks Kelly about reducing traveled work by 50%, maintaining a positive defense margin despite tanker news, and the impact of Kelly's leadership on operational improvements.

Kelly Ortberg discusses the improvements made in the aircraft building process, particularly focusing on reducing "traveled work," which refers to incomplete tasks that carry safety risks, such as the door blowout issue. A new "travel ready process" ensures that airplanes are not moved unless all safety-critical work is completed. Ortberg notes that the approach has halted planes in 200 out of 800 moves to ensure discipline and thoroughness. The supply chain has also improved since a prior strike, reducing shortages. On the defense side, the company is focusing on collaborative contracts to achieve mutually beneficial outcomes with customers and reports progress on key programs like T-7, DC-25, and Starliner, although Ortberg stops short of declaring full success.

The paragraph discusses a company's strategy for managing costs and performance, particularly in defense programs, with an emphasis on achieving high single-digit performance through disciplined risk management and collaboration with customers. It mentions quick identification and resolution of a minor tanker issue that did not impact quarterly results. The conversation then shifts to a discussion about production rate increases, with emphasis on maintaining stability and involving the FAA in the process by granting them ongoing access to relevant metrics through a digital dashboard.

The paragraph discusses a plan to increase production rates from 42 to 47 units but emphasizes the need for stability before making the transition, suggesting that the initial rate increase may take longer due to its novelty. Once achieved, subsequent rate increases should proceed more smoothly. The process involves thorough reviews with the FAA, which isn't new but now follows a revised process. Additionally, a separate question is addressed concerning the financial impact of an announced sale, with assurances that it won't affect long-term margin goals or service business growth, and expectations for consistent mid-teen margins.

The paragraph discusses a deal involving the sale of Jeppesen, which is an important digital asset. The transaction is worth approximately $10 billion and will be handled entirely in cash, minimizing risk for the company. Richard Safran from Seaport Research Partners asks about the implications of the Jeppesen sale on the company's portfolio. Kelly Ortberg responds by stating that they have carefully considered the aspects of the sale to ensure they retain access to critical digital capabilities for their aircraft's success. The company plans to continue doing business with Jeppesen post-divestiture and is looking at a couple more, albeit smaller, potential portfolio adjustments.

The speaker indicates that the review is complete and they have a strategy in mind, which includes a few smaller activities, and they will monitor how these develop over time. The operator then ends the Boeing Company's first quarter 2025 earnings conference call.

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