Boeing postpones the launch of its newest plane due to soaring losses

Boeing continues to receive negative news. The launch of the airline’s newest passenger plane has been postponed until 2025, and the corporation reported a significantly larger-than-expected quarterly deficit.

The aircraft manufacturer revealed on Wednesday that production of its 777X passenger plane, which it hoped to begin delivering to customers by the end of 2023, will be temporarily halted. During the epidemic, demand for long-range and widebody passenger planes, which are critical to Boeing’s commercial jet business, has been hampered by low demand for international flights.

However, Boeing ascribed much of the delay on the Federal Aviation Administration’s (FAA) longer certification process than in the past. Boeing stated that it did not want to begin manufacturing until the certification process was completed or nearly completed, as this would result in a large inventory of planes that would need to be modified before they could be delivered.

During a conference call with investors, CEO Dave Calhoun stated of regulators, “They take a little longer than they used to.” “They’re a little more thorough than they used to. Boeing is better for it in the long run.”

Boeing will suffer $1.5 billion in unusual costs as a result of delaying plans for the 777X passenger jet, beginning in the second quarter and continuing until production resumes.

In the first quarter, the business also recorded $1.2 billion in extraordinary charges, including a $660 million charge linked to higher supplier costs, higher expenditures to finalise technical requirements, and scheduling delays for the future Air Force One planes. It also includes a $367 million charge for supply chain restrictions, Covid-19, and inflationary pressures on its Red Hawk military plane, as well as $212 million in expenses relating to business disruption induced by sanctions on Russia caused by its invasion of Ukraine.

CEO David Calhoun commented, “It was a messier quarter than any of us would have liked.”

Even without such charges, the business suffered a $1.5 billion core operating loss in the first quarter, significantly more than Boeing’s $353 million operating loss in the first quarter of 2021. Refinitiv polled analysts, who predicted a $399 million core operating loss for the period.

In comparison to a year before, the company’s revenue dropped by 8% to $14 billion. Revenue was expected to increase to $16 billion, according to analysts.

Despite the issues, Calhoun stated that the business remained confidence in the 777X. One of the reasons for the plane’s production delay, he claimed, is the present certification process with the Federal Aviation Administration.

“We remain confident in the 777 program and our customers continue to see the value,” he said in the note to Boeing staff. “Airplane programs serve our market for several decades, and it is important we take the time now to position for long-term success.”

Boeing announced that it has taken a significant step toward resuming deliveries of another widebody plane, the 787 Dreamliner, which have been delayed since June 2021 owing to quality control issues. Boeing announced on Wednesday that it has submitted a certification plan to the Federal Aviation Administration (FAA) that would allow deliveries to restart, though it did not say when that would happen.

“Everyone would love for me to give you a date,” Calhoun said in his CNBC interview. “I can’t do that because the FAA controls that process. We are confident and comfortable we’ve submitted the best that Boeing can submit.”

Calhoun explained that the loss on the Air Force One planes was due to Boeing agreeing to furnish the planes at a set price without knowing about the delays caused by Covid and the surge in expenses of materials and services offered by its partners.

“I’m just going to call a very unique moment, a very unique negotiation, a very unique set of risks that Boeing probably shouldn’t have taken,” he told investors. “But we are where we are, and we’re going to deliver great airplanes. And we’re going to recognize the costs associated with it.”

Boeing (BA), a Dow Jones industrial average component, was down more than 7% in noon trading on Wednesday.