(Reuters) -Boeing on Wednesday cut its 737 delivery forecast for this year due to quality issues at supplier Spirit AeroSystems, a temporary setback to the planemaker that is looking to recover from its own set of crises.
Despite falling short on projected 737 deliveries, Boeing stuck to its goal of generating $3 billion to $5 billion in free cash flow this year. Shares were up 3.6% in premarket trade.
The company was aiming to deliver 400 to 450 737 jets in 2023 but was forced to temper that goal to 375 to 400 jets after two separate quality issues at Spirit, which makes fuselages for the cash-cow narrowbody jets.
Boeing plans to meet a delivery target of at least 70 widebody 787 Dreamliners in 2023 and is transitioning from a production rate of four to five jets per month.
The company also intends to keep its 737 production ramp up plan intact.
Meanwhile, the company’s ailing defense business continues to struggle with cost overruns on fixed price contracts due to inflationary pressures.
It reported another quarter of negative margins due to combined losses of $797 million on its next-generation Air Force One and an unspecified satellite program.
Earlier this month, Boeing said it had expanded the scope of its inspections of a production defect arising from misdrilled holes that affect its bestselling 737 MAX 8 aircraft.
“I have heard those outside our company wondering if we’ve lost a step. I view it as quite the opposite,” said Boeing CEO Dave Calhoun in a letter to employees.
“Thanks to the culture we’re building, we have identified non-conformances from the past that we now have the rigor to find and fix once and for all.”
The company delivered 70 737 aircraft in the third quarter, down 20%. Planemakers get the bulk of the payment when they hand over jets, so delivery numbers are closely watched.
Boeing has worked to step up deliveries to speed up its recovery from overlapping safety and pandemic-induced crises. However, it has faced disruptions for the second year in a row, though demand for jets is booming.
It was forced to cut its 2022 delivery goal due to industry-wide supply and labor shortages, some of which have abated this year.
Analysts, however, remain upbeat on Boeing’s prospects given the bulging jet order books that should provide a bulwark against any economic downturn.
For its third quarter through September, Boeing reported a wider-than-expected cash burn of $310 million compared with cash generation of $2.91 billion a year ago. Analysts had projected a $272 million cash burn for the quarter, according to LSEG data.
The company reported a wider than expected loss of $3.26 per share, compared with average analysts’ expectation of $2.96 per share, according to LSEG data. The company reported $18.1 billion in revenue, slightly beating consensus estimates of $18.0 billion.
(Reporting by Abhijith Ganapavaram in Bengaluru and Valerie Insinna in Washington; Editing by Arun Koyyur and Chizu Nomiyama)
