The performance of the world's two major aircraft manufacturing giants, Boeing and Airbus, continued to be under pressure in the first half of the year due to challenges in the defense aerospace business and aviation industry chain.
As of July 31st local time, both Boeing (BA) and Airbus (AIR) have disclosed their financial performance for the first half of the year ending June 30, 2024.
Specifically, Boeing's revenue in the first half of the year was 33.435 billion US dollars, a year-on-year decrease of 11%; GAAP net loss was $1.794 billion, with the loss expanding more than two-fold year-on-year. The second quarter revenue was lower than market expectations, at $16.866 billion, a year-on-year decrease of 15%; GAAP net loss was $1.439 billion, with the loss expanding more than 8 times year-on-year.
Boeing Q2 and H1 financial data
Airbus' revenue in the first half of the year was 28.825 billion euros, a year-on-year increase of 4%; Net profit was 825 million euros, a year-on-year decrease of 46%; Adjusted pre tax profit was 1.391 billion euros, a year-on-year decrease of 47%. The second quarter revenue exceeded market expectations by 15.995 billion euros, which was basically the same as the same period last year; Net profit was 230 million euros, a year-on-year decrease of 78%; The adjusted pre tax profit was 814 million euros, exceeding market expectations and a year-on-year decrease of 56%. The decline in profit was mainly related to expenses in the aerospace business.
Airbus financial data for the first half of this year
Airbus Q2 financial data
Boeing stated that the losses in the first half of 2024 were mainly due to a decrease in commercial aircraft deliveries and losses in defense development projects. The growth of Airbus' performance mainly reflects the increase in the delivery quantity of civil aircraft and the sales volume of Airbus' defense and aerospace air power business. Airbus CEO Guillaume Faury stated in this semi annual report that "the financial performance of the first half of the year mainly reflects the major expenditures of the aerospace business, and we are addressing the root causes of these issues. In terms of civil aircraft, we are focused on aircraft delivery and preparing for future capacity increases, while addressing specific supply chain challenges and protecting the procurement of critical work packages
It is worth noting that both Boeing and Airbus mentioned in their financial reports that financial pressure has intensified due to issues related to their defense and aerospace businesses. For example, Boeing's department suffered its worst quarter since mid-2023, losing $1 billion on fixed price contracts. In addition, in terms of commercial aircraft, the two aircraft manufacturing giants still face supply chain constraints and component shortages.
Both Boeing and Airbus' commercial aircraft business saw a year-on-year decline in profits in the first half of the year, and the aviation supply chain remains under pressure
Focusing on its main business, Boeing's commercial aircraft business revenue in the first half of the year was $10.656 billion, a year-on-year decrease of 31%; The operating loss was 1.858 billion US dollars, compared to 998 million US dollars in the same period last year. Airbus' commercial aircraft business had a revenue of 21.215 billion euros in the first half of the year, a year-on-year increase of 4%; The adjusted pre tax profit was 1.954 billion euros, a year-on-year decrease of 13%. Airbus stated that although the delivery volume has increased, this portion has decreased due to investments in the future.
In terms of commercial aircraft delivery volume, Boeing delivered a total of 175 civilian aircraft in the first half of the year, a year-on-year decrease of 34%. Airbus delivered a total of 323 civilian aircraft in the first half of the year, compared to 316 in the same period last year. This year's deliveries include 28 A220 aircraft, 261 A320 series aircraft, 13 A330 aircraft, and 21 A350 aircraft.
In terms of orders, the total number of Airbus commercial aircraft orders significantly declined in the first half of the year, dropping from 1080 in the same period last year to 327, a year-on-year decrease of nearly 70%; The net order volume was 310 units, a year-on-year decrease of 70%. The reserve order volume for the first half of 2024 has significantly increased, reaching 8585 aircraft. Boeing did not disclose the order volume for the second quarter or first half of the year in its financial report, but showed that the reserve orders for the first half of 2024 included over 5400 aircraft worth $516 billion.
It is worth noting that at the globally renowned Farnborough Airshow held at the end of July this year, both major aircraft manufacturers did not place huge orders for hundreds of aircraft, and Boeing's order performance also lagged far behind Airbus. In addition, due to being deeply involved in quality and safety issues, Boeing remained relatively low-key during this air show.
According to Ishka, a consulting firm cited by foreign media, Boeing received a total of 96 orders and commitments at the Farnborough Airshow, including previously achieved sales, while Airbus had 266 orders, far lower than the 826 orders at last year's Paris Airshow.
The aviation supply chain crisis has been ongoing for many years, and Boeing and Airbus have been working hard to cope with the production and supply pressure of commercial aircraft. Recently, Christian Scherer, CEO of Airbus Commercial Aircraft Business, stated that Airbus is adopting a more hands-on approach than ever before, deploying over 200 supply chain engineers among suppliers.
As early as the end of June, Airbus lowered its full year 2024 commercial aircraft delivery target, expecting to deliver 770 aircraft by the end of the year, compared to the previous expectation of 800 aircraft. In addition, Airbus has announced plans to increase production capacity for its best-selling A320 series aircraft, with an expected goal of producing 75 A320 series aircraft per month by 2027, up from 2026.
In addition to supply chain issues, Boeing is also working hard to overcome the safety crisis caused by the passenger cabin door detachment incident, as well as a series of manufacturing defects that have led to a decrease in production. In response to the quality crisis, Boeing has reduced the production of commercial aircraft. According to the financial report, Boeing's cash consumption in the second quarter reached $4.33 billion, with a similar decrease in cash flow in the first quarter due to a slowdown in production. Boeing Chief Financial Officer Brian West stated during the earnings call that due to "short-term operating capital pressures, it is expected that cash will be depleted again in the third quarter. West stated in May that due to a decrease in aircraft deliveries compared to the same period last year, Boeing will "burn money" instead of making money in 2024.
Boeing's cash flow data for the first half of this year
In terms of subsequent production capacity plans, Boeing stated in this financial report that the best-selling 737 model plans to gradually increase production in the third quarter and still plans to increase production to 38 aircraft per month by the end of this year. The 787 project still plans to restore its monthly production capacity of 5 aircraft by the end of the year. In July, Boeing announced the acquisition of Spirit AeroSystems, which is expected to be completed by 2025. The 777X project began FAA certified flight testing after obtaining type inspection authorization.
On the Airbus side, the A220 project continues to move towards the goal of producing 14 aircraft per month by 2026, with a focus on the project's industrial maturity and financial performance. The ultra long range A321XLR aircraft equipped with CFM engines has obtained a type certificate issued by the European Aviation Safety Agency (EASA) in early July and is expected to enter operation in the late summer of 2024. In terms of wide body aircraft, Airbus will continue to move towards the goal of producing 4 A330 aircraft in 2024 and 12 A350 aircraft in 2028. Looking ahead, Airbus expects to deliver approximately 770 civilian aircraft by 2024, with an adjusted pre tax profit of approximately 5.5 billion euros and a free cash flow of approximately 3.5 billion euros before mergers and acquisitions and customer financing.
Boeing's stock price rose on the day of announcing the change of leadership. Can the new leader "save" the company's reputation in the future?
On July 31st local time, Boeing also announced significant personnel changes within the company. The company's board of directors has elected Robert K. Kelly Ortberg as the new president and CEO, effective August 8, 2024. Ottoberg will also serve as a director of Boeing.
Ottoberg will succeed David Calhoun, who announced earlier this year that he will retire from the company. Calhoun has served as President and CEO since January 2020 and as a director of Boeing since 2009. Since he took office, Boeing has been plagued by supply chain delays. At the end of March this year, Calhoun stated in a letter to employees that he would step down as CEO at the end of this year.
It is worth noting that Ultraberg is a senior aviation industry insider, but not an old employee of Boeing. Ottoberg is 64 years old and has over 35 years of leadership experience in aerospace. He started working as an engineer at Texas Instruments in 1983, then joined Rockwell Collins as a project manager in 1987, and ultimately became president and CEO in 2013. After five years at the helm of Rockwell Collins, he led the company's integration with United Technologies and RTX until retiring from RTX in 2021. He has held many important leadership positions in the industry, including director of RTX Corporation. In addition, he also serves as a director of Aptiv PLC, a global technology company that is a leader in the vehicle system architecture industry. He has served as the Chairman of the Board of Directors of the American Institute of Aeronautics and Astronautics (AIA).
Boeing Chairman Steven Mollenkopf stated that Ultraberg is an experienced leader highly respected in the aerospace industry, renowned for building strong teams and operating complex engineering and manufacturing companies. Boeing looks forward to working with him to lead the company through this critical period in its long history. As a leader and pioneer, Boeing has an outstanding and rich history in the industry. I am committed to inheriting this tradition with the company's over 170000 dedicated employees, while prioritizing safety and quality. There is still a lot of work to be done, and I look forward to starting
The market and aviation industry are also looking forward to whether the arrival of Ultraberg can solve the many challenges faced by Boeing.
According to foreign media reports, Ultraberg will face a series of challenges in leading Boeing to turn losses into profits, including sustained losses, additional scrutiny from regulatory agencies, supply chain pressures, trust crisis among aviation customers caused by aircraft delays, cost overruns in the defense sector, and tense labor negotiations, with the threat of strikes currently present.
Since the 737 MAX 9 passenger cabin door detachment accident in January this year, Boeing has been facing increasing pressure in factory quality control. The Federal Aviation Administration (FAA) of the United States has requested Boeing to slow down the production speed of the 737 MAX aircraft to ensure aircraft quality. After several safety incidents worldwide, Boeing is driving the company's transformation. Boeing also stated in this financial report that it submitted a comprehensive safety and quality plan to the FAA in the second quarter.
Several Boeing executives have recently mentioned in public the challenges currently faced by the company. A supply chain executive previously stated that suppliers and airlines have the right to be skeptical of Boeing's aircraft production forecasts, as Boeing's commercial aircraft production has recently declined. In his opening speech at the Farnborough Airshow, the Boeing Business Jet Director acknowledged that Boeing has disappointed customers in the past few years and stated that the company is driving "transformational change" based on feedback from customers, regulators, and employees, which will take several years to complete.
As of the close of the US stock market on July 31st, Boeing's stock price was reported at $190.6 per share, up 2%, and its stock price has fallen nearly 27% since the beginning of this year.
