Amid ongoing strikes, supply chain disruptions, rating downgrades, and multiple challenges, Boeing's third quarter losses doubled year-on-year. The new CEO announced a reform plan in hopes of restoring Boeing's previous industry leadership position.
On October 23rd local time, global aircraft manufacturer Boeing (BA) announced its third quarter performance. In the third quarter, the revenue reached 17.84 billion US dollars, a year-on-year decrease of 1%; The net loss under General Accounting Principles (GAAP) in the United States was $6.174 billion, an increase of 2.77 times year-on-year, making it the largest loss since 2020; GAAP reported a loss of $9.97 per share, which increased 2.7 times year-on-year.
Revenue of 51.275 billion US dollars was achieved in the first three quarters, a year-on-year decrease of 8%; GAAP net loss of $7.968 billion, with the loss expanding 2.6 times year-on-year; GAAP reported a loss of $12.91 per share, with the loss expanding 2.55 times year-on-year.
The announcement stated that the third quarter performance was mainly affected by the shutdown of the American International Association of Machinists and Aerospace Workers (IAM) and earnings in the commercial aircraft and defense sectors. Among them, the decline in revenue in the third quarter was mainly due to a decrease in wide body aircraft deliveries, including the impact of IAM shutdown.
Boeing needs time to regain its former glory, but as long as we establish the right goals and culture, we can once again become an iconic company and leader in the aerospace industry. Looking ahead, we will focus on fundamentally changing culture, stabilizing business, and improving project execution, while laying the foundation for Boeing's future, "said Kelly Ortberg, President and CEO of Boeing
This is also Otterberg's first quarterly financial report since taking office. Starting from August 8th this year, Ottoberg became the new President and CEO of Boeing. Ottoberg is a senior aviation industry insider, 64 years old, with over 35 years of leadership experience in aerospace. Previously, the market and the aviation industry were also looking forward to whether Ultraberg's appointment could solve the many challenges faced by Boeing and restore stability after experiencing multiple safety and quality crises.
As of the close on October 23, Boeing was trading at $157.06 per share, down 1.76%, up 0.63% after hours, and its stock price has fallen nearly 40% since the beginning of the year.
Boeing's commercial aircraft business is under pressure in the third quarter
Specifically, in terms of its main business, Boeing's commercial aircraft business achieved a revenue of $7.443 billion in the third quarter, a year-on-year decrease of 5%; The operating profit margin was -54%, compared to -8.6% in the same period last year; The operating loss was 4.021 billion US dollars, compared to 678 million US dollars in the same period last year, with the loss expanding 4.9 times year-on-year.
The commercial aircraft business achieved a revenue of $18.099 billion in the first three quarters, a year-on-year decrease of 23%; The operating profit margin was -32.5%, compared to -7.2% in the same period last year; The operating loss was 5.879 billion US dollars, compared to 1.676 billion US dollars in the same period last year, with the loss expanding 2.5 times year-on-year.
According to the financial report, the commercial aircraft business had a net order volume of 49 aircraft this quarter, with 116 aircraft delivered and over 5400 aircraft orders valued at $428 billion. The total order volume of the company reached 511 billion US dollars. At present, 4 787 aircraft are produced per month, and it is planned to return to 5 aircraft per month by the end of the year.
Due to the ongoing strike of 33000 workers on the West Coast of the United States, production of 737 MAX, 767, and 777 aircraft has been suspended. Currently, the wave of strikes at Boeing continues to intensify, which has had a certain impact on performance. Boeing Executive Vice President and Chief Financial Officer Brian West stated during the conference call that the company has made good progress in stabilizing production, but due to ongoing strikes and cash flow savings, the target of producing 38 737s per month by the end of the year has been postponed, but is expected to be achieved next year. According to the financial report, 92 737s were delivered in the third quarter, a year-on-year increase of 22.
The top priority for everyone right now is to end the IAM strike, "Ultraberg said in a conference call. In his first week in office, he met with union leaders and let them know that Boeing is committed to rebuilding the relationship between the two sides." We really hope that the package plan proposed by Boeing can help employees return to work. After the employees return, our task is to restart the factory and supply chain
It is worth noting that on the 23rd, Boeing workers voted on a salary agreement for a 35% increase over four years, which was rejected by 64% of workers, resulting in the continuation of the 6-week strike. According to Standard&Poor's Global Ratings, the strike has caused the company approximately $1 billion in monthly losses.
All of the company's financial forecasts and long-term prospects are under evaluation, which takes time and requires seeing some stability in the business before making any goal plans. Currently, there is no updated content to provide. "Ultraberg pointed out in the conference call that the company is evaluating its investment portfolio, and in the long run, Boeing's core businesses such as commercial aircraft and defense will remain in the company to improve efficiency, but some peripheral things will be cleared. The process is currently underway but there is no specific list yet.
The new CEO emphasizes that making changes and maintaining Boeing's investment grade rating is the top priority
Boeing is at a crossroads of development, and to restore its leadership position, it will take time and change, "Otterberg said in a phone conference. Trust has weakened, debt has increased, and the company's overall performance has made serious mistakes, disappointing many customers. But at the same time, Boeing also faces huge opportunities, such as holding orders worth about $500 billion.
In terms of specific measures, Ultraberg pointed out that firstly, fundamental changes need to be made to the company culture. Secondly, stable operations need to be achieved through the implementation of safety and quality plans and the management of the balance sheet. Thirdly, discipline must be strengthened. Fourthly, a new future must be created for Boeing.
Oterberg previously announced plans to lay off approximately 10% of its workforce, or around 17000 people, in the coming months. The layoffs will include executives, managers, and employees. Boeing's business is also facing adjustments, among which the delivery of the first aircraft of Boeing's new wide body aircraft 777X will be postponed to 2026, and production of 767 freighters will be stopped in 2027 after completing the remaining orders.
When it comes to layoffs and business adjustments, Ultraberg stated during the conference call that the focus is on integrating inefficient areas and continuing to reduce non essential activities. The transformation is already underway. In response to investors, Autoberg stated that the focus of layoffs will be on simplifying management expenses activities and employees will not be allowed to leave production or engineering laboratories. The plan is to increase production next year. At the same time, the team may be supplemented as needed, without excluding some additional external resources.
The financial report also pointed out that Boeing's operating cash flow in the third quarter was $1.345 billion, compared to $22 million in the same period last year, reflecting a decrease in wide body aircraft deliveries and the impact of IAM shutdowns. Free cash flow was -1.956 billion US dollars, compared to -310 million US dollars in the same period last year. In October, Boeing signed a new $10 billion short-term credit agreement, with a total available credit of $20 billion that has not yet been utilized. Wester said that Boeing may continue to burn money this year and next year, and the free cash flow in 2025 will be significantly better than in 2024, but it is still expected that the free cash flow for the whole year of 2025 will be negative.
According to foreign media reports, Moody's and S&P Global Ratings have both stated in recent weeks that they are considering downgrading Boeing's credit rating to junk, and Boeing is currently working to avoid a credit rating downgrade.
During the conference call, West stated that maintaining an investment grade rating is the company's top priority. The company is actively engaging with rating agencies for a constructive dialogue. The company plans to comprehensively address the balance sheet issues in the short term, which may include issuing equity and equity linked securities. I believe that over time, business performance and capital structure will return to a level completely consistent with investment grade.