A major headache for Boeing as delivery of the Dreamliner remains suspended

The latest information from Boeing

Last 2 years Boeing The company’s popular wide-body, Dreamliner airliner, was used to sell the 737 Max after it landed after two fatal crashes.

This will rotate the table. Max, the flagship product of the Boeing jet family, has resumed service and the group is filling the backlog of orders, but delivery of the 787 Dreamliner remains suspended after a production recession.

The 787’s glitch has grown to the point where Boeing warns that it may record a forward loss in the Dreamliner program. Perhaps on Wednesday, the company will report its second-quarter results.

But the issue raises what S & P global analyst Christopher Denikolo called “but a multi-billion dollar question.” Why is Boeing having trouble making this plane?

The Chicago-based company said this month that most of the more than 100 787s already produced will not be delivered this year, contrary to CEO David Calhoun’s guarantee in April.

Boeing also reduced wide-body jet production to less than five a month in early July. This, along with the company’s warning, suggests that the program will declare forward loss.

This means that the 787 program will lose the cost of 1,500 aircraft with orders delivered or confirmed in the current block. This is because the cost is higher than the company expects or the sales are lower.

Boeing has already recorded forward losses in four programs. The Twin Isle 777X is $ 6.5 billion, and the US Air Force KC-46A refueling tank truck is $ 5.1 billion, or $ 486 million. With Air Force One US President’s plane.

The forward loss of the 787, which produces more deliveries than other programs, could put pressure on the company to continue delivering 737 Max jets to drive future revenues and bring cash.

Analysts say something must have changed to cause glitches in a program that has been running smoothly for years.

The Federal Aviation Administration has found a flaw in the manufacture of Boeing aircraft. This is because they see more difficulty in everything the manufacturer does after two deadly 737 Max crashes. Alternatively, the company has changed the manufacturing process.

“This isn’t a whole new program,” said Credit Suisse analyst Robert Spingarn. “So either [the FAA are] Take a closer look at it. .. .. Or did Boeing change its approach to the way aircraft are manufactured? Will you introduce cost-effective production to save costs and have unintended consequences for your products? “

Morningstar analyst Barquette Huey said: Return to the company that sells the aircraft in operation and you won’t have a headache every two months. .. .. The opposite is true that these forward losses are evidence. “

In 2019 and 2020, Dreamliners continued to bring in cash after regulators around the world based on Max for safety concerns. But now Boeing is having a hard time delivering jets.

Boeing delivered 14 Dreamliners in the first half of this year, compared to 158 in 2019 and 53 in 2020, which accounted for the majority of the company’s commercial deliveries. This will be compared to the delivery of 113 aircraft in the first half of this year, 127 in 2019 and 43 in 2020.

The company stopped delivering Dreamliner in October by FAA. Research How did the operator attach the wrong size shims (thin materials used to create a better fit) to the joints between the fuselage sections of some 787s? Apart from this, some aircraft did not meet the engineering specifications for skin flatness.

Boeing resumed delivery in March, but stopped delivery again in May after the FAA requested more data on the manufacturer’s plans to inspect the plane.

Then, on July 13, Boeing “temporarily” reduced production to less than five months after discovering a new flaw in the fit and finish of the nose of airplanes and cockpits manufactured by the spirit of the supplier. I said I would lower it. Aero Systems.

“We will continue to take the necessary time to ensure that Boeing aircraft meet the highest quality before delivery,” the company said.

If Boeing decides to announce a forward loss at 787 this week, Brian West, the next Chief Financial Officer to take office in August, can avoid delivering bad news after he starts.

West can also point out positive points. The company has all the liquidity it needs. It raised $ 25 billion from the bond market in April last year, allowing it to overcome the Covid-19 crisis and freely avoid pandemic-related aid from the government.

According to S & P Global, it has $ 63 billion in debt, the lowest rating in the band, Triple B Minus, and a negative outlook, but still sticks to investment grade credit.

In addition to this, Wall Street analysts polled by FactSet predict that profitability will recover in the third quarter. The company reported a net loss of $ 537 million in the first quarter, the sixth consecutive quarter of losses. Wall Street analysts forecast a loss of 77 cents per share in the second quarter.

They predict that free cash, or operating cash minus fixed investment, will be positive in the fourth quarter.

A major headache for Boeing as delivery of the Dreamliner remains suspended

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