Salem Radio Network News Thursday, October 28, 2021


Boeing posts first profit in almost two years helped by 737 MAX deliveries

By Ankit Ajmera and Eric M. Johnson

(Reuters) -Boeing Co on Wednesday posted its first quarterly profit in almost two years, as deliveries of its best-selling 737 MAX jets to airlines gained traction amid a sharp rebound in travel bookings following an increase in global COVID-19 vaccinations.

The 737 MAX is integral to Boeing’s financial recovery, as the U.S. planemaker scrambles to recoup billions of dollars in lost sales from the pandemic, push past the safety scandal caused by two fatal 737 MAX crashes, and deal with structural defects of its bigger, more profitable 787 planes.

Boeing shares were up 5% at $233 in midday trading following the results, which were also fueled by higher defense and services sales.

Chief Executive Officer David Calhoun said in a message to employees the company now plans to keep staffing levels stable at around 140,000 employees, after previously targeting a reduction to 130,000 by the end of 2021.

Calhoun told investors on the company’s earnings conference call, “The U.S. domestic market is showing remarkable recovery.” But he cautioned Boeing’s recovery faces threats such as a longer-off return of international travel, COVID-19 variants, and a labor shortage in its sprawling supply chain.

“We anticipate a multi-year recovery,” Calhoun added.

Boeing’s 737 MAX remains grounded in China, where trade tensions between Washington and Beijing have stunted sales, though Calhoun said he still expects the 737 MAX to win approval before year-end.

“Hopefully bigger trade issues don’t get in the way,” Calhoun added.

The company is also working against tougher regulatory scrutiny and weak demand for its delayed 777X mini-jumbo, and months of costly repairs and forensic inspections to fix production-related defects on its 787 program.

Boeing reiterated plans to cut 787 production to an unspecified rate lower than 5 jets per month after finding a new problem, first reported by Reuters, and to deliver fewer than half of the lingering 100 or so 787 Dreamliners in its inventory this year – instead of the “vast majority” it had expected.

“Good news, the inspections are done, toe to tail,” Calhoun said. “The underlying causes are getting understood and resolved.”

Calhoun added that Boeing may need to rethink its plan for production rate increases if the 737 MAX is not approved in China by year-end.

Boeing said it has delivered more than 130 737 MAXs since a safety ban on that jet was lifted in November 2020, and that it was building 16 737 MAX jets per month at its Seattle-area factory. It aims to increase output to 31 per month by early 2022.

“Defense markets are strong and they’re successfully conserving cash,” said Teal Group analyst Richard Aboulafia. “Much depends on the angle of the commercial recovery.”

Looking to build momentum, Boeing is preparing to launch its delayed CST-100 Starliner astronaut capsule to the International Space Station on Friday in a crucial do-over test following a near “catastrophic failure” during its 2019 debut.

Calhoun said he is “optimistic, confident” about Friday’s launch after software flaws and NASA reviews sidelined its Starliner for 18 months, and about Boeing’s ability to compete against newer space players such as billionaire entrepreneur Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin.

Boeing’s core operating profit was $755 million in the second quarter, compared with a loss of $3.32 billion a year earlier.

Revenue rose 44% to about $17 billion.

Analysts had on average expected Boeing to report a quarterly loss of $454.8 million on revenue of $16.54 billion, IBES data from Refinitiv showed.

Boeing’s commercial airplanes division, its traditional profit powerhouse, reported a quarterly loss of $472 million, but its defense business earned $958 million and its services division took in $531 million.

Boeing still expects to turn cash flow positive in 2022.

(Reporting by Eric M. Johnson in Seattle and Ankit Ajmera in Bengaluru; additional reporting by Tracy Rucinski in Chicago; editing by David Holmes, Jason Neely and Steve Orlofsky)


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