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Boeing does not expect China to allow the 737 Max flight until the second half of the year, which could affect the extent to which the company increases its aircraft production rates.
In Wednesday’s earnings call, aircraft manufacturer executives stressed the need for regulatory approval and general US-China relations as a risk factor for their business, along with Covid-19 infection rates and the pace of vaccinations.
The Asian country is a critical market for Boeing, as the company accounts for 25% of its projected global aircraft growth over the next decade.
Boeing said it plans to increase Max’s production to 31 per month by 2022. But chief financial officer Greg Smith said the regulations approved by Max from Beijing “will affect the 737 delivery plan… And China’s demand activity will affect future production rates.”
CEO David Calhoun said Boeing was highlighting the US-China relationship now to ensure that the new Biden administration “knows the importance of making those relations right”.
His remarks were like “claiming the risk of a car accident you’ve already been through,” said aerospace analyst Richard Aboulafia of the Teal Group.
“Once a former Boeing executive told me that there have always been kidnappers named anywhere in China,” he said. “It’s strange that a couple of years have passed since the gallop of trade and geopolitical tensions, and now it’s emerging as a risk zone. Yes, do you think so?”
Boeing reported lower revenues than in the quarter before three years ago, when the 737 Max was in the midst of a crisis, hurt by delays in 787 shipments and global pandemics, which continues to depress airline demand.
Revenue fell 10 percent in the first quarter to $ 15.2 billion, and the company had a net loss of $ 561 million. Its loss was slightly reduced from a net loss of $ 641 million a year ago.
Calhoun said: “While the global pandemic continues to plague the market environment, we see 2021 as a key turning point for our industry as the distribution of vaccines accelerates, and we work together to help enable strong recovery across government and industry.”
Out-of-doors cash flow has slowed. The company reported free quarterly revenue of $ 3.7 billion (operating income minus capital expenditures) compared to $ 4.7 billion a year ago.
Boeing also reported a $ 318 million charge in connection with a contract for the Air Force One program that builds jets for the U.S. president. The company said earlier this month that it had terminated its contract with supplier GDC Technics, which is installing the interior of the aircraft, after failing to comply with “contractual obligations”. GDC Technics filed for Chapter 11 failure on Monday.
Boeing resumed delivery of its 787 wide-body aircraft last month quality problems it caused a month’s delay, which hurt the first-quarter results. The jet manufacturer drops its monthly production rate to five out of six, as demand for wide bodies remains low. They are mainly used on long-haul international routes, and the aviation industry expects it to have the slowest recovery in air traffic.
Boeing continues to fight off the ground of the 737 Max aircraft for almost two years a couple crashes which brought together 346 people. On April 9, he said he warned customers about the electrical problem with the planes. The U.S. Federal Aviation Administration later said 106 planes landed while the company was working on repairs.
“We are finalizing plans and documentation with the FAA to determine the process by which operators need to return their aircraft to service,” Calhoun said in a note to staff. “Once approved by the FAA, we expect the work to take a few days for each aircraft.”
Although Boeing reported a net increase in orders for the second month in a row in March, it was “at least gratifying”, but the delivery of 29 aircraft last month was “inadequate,” analyst Cai von Rumohr Cowen said in a statement.
The Chicago-based company reported a record Net loss of $ 12 billion By 2020, and has long-term debt of nearly $ 58 billion. It hit the debt markets a year ago $ 25 billion to get out of the pandemic, as airlines delayed shipments due to falling passenger numbers and revenues.
A lot, though not all airline executives have anticipated a recovery in aviation driven by demand for travel on board aircraft.
The company board said last week that Boeing would raise the retirement age from 65 to 70, and that 64-year-old Calhoun would allow him to continue in his role. Smith, a three-decade veteran of Boeing, who was considered a potential competitor for the top job, said he would retire in July.
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