(Bloomberg) – Boeing Co. fell the most in four months after the planner slashed its annual forecast for deliveries of its 737 narrowbody jets and revealed it may drop the smaller and smaller ‘Max’ versions. the largest of the working aircraft.
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In a safety filing, Boeing said it may choose to cancel the 737 Max-7 and -10 variants if an impending deadline for government safety approvals is not extended and “we are otherwise unable to obtain certification”. This echoed comments earlier this year from general manager Dave Calhoun.
The disclosure came after Chief Financial Officer Brian West gave a lowered delivery target for 737 planes, saying the manufacturer now expects to deliver 375 of the jetliners this year. Boeing had previously targeted deliveries of nearly 500 before lowering the target in July to “low 400”.
The manufacturer has indicated that it will not accelerate work on the cash cow plane anytime soon, even as demand increases for the fuel-efficient jets favored by budget airlines. Boeing expects the 737’s monthly production rate to remain within 30 degrees for much of next year, but production is expected to rise sharply in recent months, West said on a conference call. to discuss quarterly results.
Read more: $2.9 billion cash gain mitigates shortfall
Shares fell 8.8% in New York, the worst performance for the Dow Jones Industrial Average and the biggest one-day drop since June 13. The stock has lost around 34% of its value this year.
Congress in late 2020 passed legislation requiring all airliners to have more modern warning systems than existing 737s, but it gave Boeing two years to finalize certification for its two remaining Max models. , the 7th and 10th. However, it appears the company won’t complete work on either plane by the deadline at the end of this year, the Federal Aviation Administration has warned in recent months.
So far, Congress has not decided to extend the deadline.
The lowered expectations underscore deep operational problems at Boeing, which also revealed losses of $2.8 billion on a handful of defense programs. It faces inflation, parts shortages and labor shortages that have disrupted supply chains around the world.
Yet Boeing’s grim assessment of the flow of Leap engines to its 737 Max assembly lines contradicts the picture painted by General Electric Co. a day earlier. CFM International, a subsidiary of GE-Safran SA, delivered 347 engines in the third quarter, an improvement of more than 50% compared to the second quarter.
GE had sent about 200 engineers in the most recent period to help resolve bottlenecks that had limited engine power powering both the 737 Max and the Airbus A320neo. The company said further improvements would be needed to support Boeing and Airbus’ plans to increase production rates.
“I don’t buy engines as a limiting factor” for Boeing production, said Bloomberg Intelligence analyst George Ferguson. He noted that Airbus was delivering at a higher rate, suggesting that Boeing could face additional operational issues.
Earlier on Wednesday, Boeing reported an adjusted third-quarter loss of $6.18 a share, its fifth straight missed profit, as the defense unit faced cost overruns on its KC-46 aerial tanker, Air Force One and other military contracts. Sales of $16 billion were also lower than analysts’ estimates.
Still, its free cash flow of $2.9 billion was well above expectations, which is only the second time Boeing has generated positive cash since Calhoun took the top job in early 2020.
–With the help of Alan Levin.
(Updates with the closing shares of the first paragraph)
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