Boeing sees massive cash drain as 737 Max episode takes toll

Boeing predicted a massive cash drain for Q1 as regulatory scrutiny and slower output of its 737 Max jetliner following a January mid-air accident take their toll on its finances. Cash outflow will reach $4b to $4.5b in Q1, Boeing CFO Brian West told a Bank of America conference in London on Wednesday. A plan to reach a $10b cash flow target by 2025-26 will be at the far end of that window. For the year, free cash flow will be in the single digit billions of dollars, West said. “We’re not at the moment where we can manage the near term for these financial outcomes because of the work at hand around stability,” West said. “Our expectation is that we’ll get more predictable and better positioned, but it will take time.” West said margins at the commercial aircraft business will be negative to the tune of about 20% in the first quarter as the company pays out compensation for a near-catastrophic fuselage failure on a Boeing 737 Max 9 aircraft on Jan. 5 and absorbs the broader hit from the episode. While margins will improve for the year, they will remain negative for 2024, the CFO said. As part of the fallout from the Jan. 5 episode, regulators have capped Boeing’s output to make sure the company has the resources to review its manufacturing processes. West said production rates will be lower in the first half and the rise again in the latter part of the year toward 38 737 Max units a month. Anything beyond that “will be up to the FAA,” West said, referring to the FAA. Boeing shares fell 1.8% in US premarket trading. The company is set to report earnings for Q1 in late April. Weeks after the January incident, Boeing suspended its forecast for 2024, breaking with tradition of guiding investors for the year, as it worked through fixing its processes and the intensifying public scrutiny on its production standards. <br/>