Boeing (BA) – Get Free Report shares lurched higher Friday following a report that suggested United Airlines (UAL) – Get Free Report is close to making a deal for dozens of the planemaker’s trouble 787 Dreamliner.
The Wall Street Journal reported that United could confirm the purchase as early as this month, noting the multi-billion dollar deal would mark a major win for Boeing over its European rival Airbus just as it resumes deliveries of the flagship aircraft following a host of regulatory and production issues.
The Federal Aviation Administration gave Boeing the go-ahead in August to resume 787 Deliveries after halting them in May of 2021 over concerns linked to safety inspections.
Boeing booked orders for 10 of its 787-9 Dreamliner variant aircraft in October, the planemaker said last month, with overall bookings for all of its aircraft pegged at 122. October deliveries fell to 35 aircraft from the 51 reported in September.
Boeing shares were marked 3.3% higher immediately following news of the potential deal and changing hands at $181.65 each, a move that would extend the stock’s six month gain to around 29.3%.
Boeing posted an adjusted loss of $6.18 per share over the three months ending in October, a wider-than-expected tally that included a $2.8-billion charged linked to its Pentagon defense contracts.
Free cash flow, however, came in firmly ahead of Street forecasts at $2.9 billion, with the group holding to its full year forecast of positive free cash flow powered by stronger commercial deliveries.
The Boeing logo is displayed on a screen, at the New York Stock Exchange (NYSE) in New York, U.S., August 7, 2019. REUTERS/Brendan McDermid
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WASHINGTON, Aug 8 (Reuters) – The U.S. government on Monday approved the first Boeing (BA.N) 787 Dreamliner for delivery since 2021, clearing the way for American Airlines to take possession, people briefed on the matter told Reuters.
American Airlines (AAL.O) said it expects to receive its first Boeing 787 delivery of the year as early as Wednesday and that the plane will enter commercial service in the coming weeks. The plane is its first 787 delivery since April 2021.
Earlier on Monday, the Federal Aviation Administration (FAA) said it expected Boeing to resume deliveries of its 787 in coming days after the manufacturer made inspection and retrofit changes needed to meet certification standards.
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Boeing halted deliveries in May 2021 after the FAA raised concerns about its proposed inspection method. In September 2020, the FAA said it was investigating manufacturing flaws in some 787 jetliners.
American Airlines said on a July earnings call it expects to receive nine 787s this year, including two in early August. It has 42 on order, excluding the plane it expects to receive this week.
Boeing said it continues “to work transparently with the FAA and our customers towards resuming 787 deliveries.”
Last month, the FAA approved Boeing’s plan for specific inspections to verify the airplane meets requirements and that all retrofit work has been completed.
Boeing has about 120 787s awaiting delivery. The FAA said it “will inspect each aircraft before an airworthiness certificate is issued and cleared for delivery.” Typically the FAA delegates airplane ticketing authority to the manufacturer but in some instances like the 737 MAX it has retained responsibility for approving each new airplane.
In the aftermath of two fatal 737 MAX crashes in 2018 and 2019, the FAA pledged to more closely scrutinize Boeing and delegate fewer responsibilities to Boeing for aircraft certification.
On Thursday, Acting FAA Administrator Billy Nolen met with FAA safety inspectors in South Carolina as the agency mulled whether to allow Boeing to resume 787 deliveries.
Before Boeing suspended production, the FAA had previously issued two airworthiness directives to address production issues for in-service airplanes. It identified a new issue in July 2021.
The planemaker had resumed deliveries in March 2021 after a five-month hiatus before halting them again. The FAA said earlier it wanted Boeing to ensure it “has a robust plan for the re-work that it must perform on a large volume of new 787s in storage” and that “Boeing’s delivery processes are stable.”
In January, Boeing disclosed a $3.5 billion charge due to 787 delivery delays and customer concessions, and another $1 billion in abnormal production costs stemming from production flaws and related repairs and inspections.
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Reporting by David Shepardson; Editing by Mark Porter, Cynthia Osterman and David Gregorio
Our Standards: The Thomson Reuters Trust Principles.
Federal regulators on Friday cleared the way for Boeing to restart deliveries of its 787 Dreamliner, which were paused more than a year ago because of quality concerns.
Boeing had submitted a plan to the Federal Aviation Administration this spring to inspect and repair those issues, which the agency approved on Friday in a major milestone on the path to delivering the planes, according to a person familiar with the decision, who wasn’t authorized by the agency to share the news. The F.A.A. will still inspect the jets before they are handed over to Boeing customers.
The Dreamliner is a twin-aisle plane commonly used for long international flights and is an important part of Boeing’s fleet. It appeals to airlines in part because it is more fuel-efficient than older wide-body planes.
The delivery delay had taken a toll both on Boeing and its customers. In January, Boeing estimated the cost of performing the repairs and compensating customers for the delay to be about $3.5 billion. Earlier this year, American Airlines said that the delivery freeze had forced it to cut several international routes it had planned to fly this summer.
The quality concerns included finding and filling paper-thin gaps in the plane’s body, replacing certain titanium parts that were made with the wrong material and other fixes. None have an immediate impact for the safety of Dreamliners flying today, Boeing said.
Boeing has already begun inspecting and repairing its inventory of about 120 Dreamliners, but it wasn’t immediately clear how soon the company would be able to start shipping the plane to customers again. An executive at American said earlier this month that it expected to start receiving part of its order of Dreamliners as soon as early August.
Boeing had already signaled this past week that it was close to restarting deliveries. “We’re readying airplanes together with our customers and have completed flight checks on the initial airplanes,” Brian West, Boeing’s chief financial officer, said on a call with investor analysts and reporters.
An F.A.A. spokeswoman declined to comment on the decision. In a short statement, Boeing said it would “continue to work transparently” with the agency and its customers toward restarting deliveries.
Boeing said this past week that it aimed to return to producing five Dreamliners a month, down from the 14 per month it was assembling before the pandemic.
The plane maker said it is benefiting from a recovery in air travel in recent months, and has been delivering new planes to satisfy growing demand for flights.
Boeing has sold more jets than rival
Airbus
SE this year, and efforts to cut costs have helped reduce the drain on its finances. But it is still hampered by manufacturing problems that have frozen most 787 deliveries for much of the past year and technical issues that forced its Starliner spacecraft launch to be scrubbed.
The company took a $183 million charge in the latest quarter to cover disrupted Dreamliner production, which has been slowed to about two a month from around five after Boeing accumulated more than 100 jets awaiting delivery. Boeing estimated on Wednesday the cost of the disrupted production could be as high as $1 billion.
The $185 million charge on the Starliner space taxi follows a $410 million hit last year to pay for a new launch after the first in December 2019 failed to reach the correct orbit. Faulty valves thwarted another launch attempt during the summer, with the flight now delayed until next year.
A new type of defect on Boeing’s Dreamliner aircraft surfaced recently, the latest in a series of issues that have led to a halt in deliveries. The company now has more than $25 billion of jets in its inventory. WSJ’s Andrew Tangel explains how Boeing got here. Photo: Reuters
Boeing Chief Executive
David Calhoun
said in an internal message Wednesday the charges reinforced “the importance of our efforts to enhance our own performance and drive stability in our operations.”
Mr. Calhoun likened work on the Dreamliner to earlier fixes of the 737 MAX, noting the company’s plans to produce 31 of those jets a month early next year, up from 19 currently. Boeing made various fixes to the MAX jet’s software, hardware and related training package while regulators grounded the aircraft for nearly two years.
The net loss of $132 million in the quarter compared with a $466 million loss in the year-ago period. Sales climbed 8% to $15.3 billion. The per-share loss of 19 cents compared with 79 cents a year earlier.
Boeing burned $262 million in cash during the quarter compared with $4.8 billion a year earlier. The improvement was helped by cost cuts, receipts from airplane deliveries and a tax gain. The core loss of 60 cents, which excludes pension costs, was better than the loss of 20 cents estimated by analysts polled by FactSet.
The company’s shares were slightly lower in morning trading.
Boeing’s services arm was its most profitable in the quarter. Sales of spare parts is an area of growth for aerospace right now as airlines return parked aircraft to service, and revenue at the services unit in the quarter almost matched those of the core commercial airplanes business.
Over the past year, Boeing has been dealing with a series of production defects with its 787 Dreamliner, the popular wide-body jet often used on long-haul flights. The manufacturing problems have drawn increased scrutiny from the Federal Aviation Administration.
The plane maker has built up an inventory of more than 100 Dreamliners worth more than $25 billion as it addresses defects and seeks regulatory approval for inspections before handing over the jets to customers.
Boeing expects to boost production of its Dreamliner after it resumes deliveries—though Mr. Calhoun said on CNBC he couldn’t predict when that would happen. The market for wide-body jets has been depressed during the Covid-19 pandemic as countries around the world imposed travel restrictions. That has eased pressure on Boeing while it addresses Dreamliner production issues.
Boeing has been hoping for significant aircraft deals with Chinese customers amid continued U.S. trade tensions with the country. China’s aviation regulators haven’t approved the 737 MAX to resume flying customers, but Mr. Calhoun said on CNBC the authorities have been working hard on the aircraft’s recertification.
Write to Doug Cameron at doug.cameron@wsj.com and Andrew Tangel at Andrew.Tangel@wsj.com
An employee works on the tail of a Boeing Co. Dreamliner 787 plane on the production line at the company’s final assembly facility in North Charleston, South Carolina.
Travis Dove | Bloomberg | Getty Images
Boeing on Wednesday said flaws in its 787 Dreamliners would cost it $1 billion in added costs and that it cut production to two planes a month as it struggles to address quality issues that led it to suspend deliveries for most of the past year.
The manufacturer wrote down $183 million of that amount in the third quarter.
Boeing said its revenue rose to $15.28 billion in the third quarter, up 8% from $14.3 billion a year ago, thanks to an improvement in commercial aircraft sales and deliveries. That was below the $16.3 billion analysts forecast. The company reported a $132 million net loss for the quarter though it was narrower than the $466 it lost a year earlier.
Boeing’s shares were up 1.1% in premarket trading.
Here’s how the company performed compared with analysts’ estimates complied by Refinitiv:
Adjusted results: A loss of 60 cents a share vs an expected loss of 20 cents a share.
Revenue: $15.28 billion vs. $16.3 billion, expected.
Boeing first disclosed quality issues with seams on the fuselages some of its 787s last year. The problems resulted in inspections that prompted Boeing to suspend deliveries of the planes to airline customers, depriving the company of cash.
Deliveries resumed briefly this year but were halted again in May for more inspections. Boeing has about 100 of the planes in inventory, analysts estimate. The company has repeatedly brought down the production rate for the jetliners. Over the summer, Boeing said it was producing fewer than five a month.
Boeing has been mired in back-to-back crises since the first of two deadly crashes of its 737 Max three years ago. While it grappled with a 20-month grounding of the planes, the pandemic decimated travel and aircraft demand. The company’s shares have lost 2% so far this year through Tuesday’s close, compared with a 22% gain in the S&P 500.
Boeing executives will face analyst questions on a 10:30 a.m. ET call Wednesday.