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Boeing's 737 Jetliner deliveries face challenges due to supplier glitch
Industry News- Sep 08,23
Boeing anticipates that the handovers of its narrowbody aircraft will closely approach the lower limits of its target, which aims to ship between 400 and 450 of the popular 737 jets in the current year.
Boeing Co has issued a cautionary statement, alerting that the deliveries of its highly profitable 737 jetliner will likely fall towards the lower end of its projected range for this year due to a recently identified supplier issue causing production constraints.
According to Chief Financial Officer Brian West, Boeing anticipates that the handovers of its narrowbody aircraft will closely approach the lower limits of its target, which aims to ship between 400 and 450 of the popular 737 jets in the current year. Furthermore, he mentioned that the profit margins for the company's commercial and defense divisions are expected to register negative figures in the third quarter due to disruptions in the supply chain.
West's remarks at the Jefferies conference provide a detailed insight into Boeing's response to yet another manufacturing defect, one that may have existed for years. The aviation giant revealed last month that some holes in the 737 bulkheads, crucial for maintaining cabin pressure, were improperly drilled by their supplier, Spirit AeroSystems Holdings Inc.
Addressing the aft-pressure bulkhead issue is proving to be a more time-consuming challenge than a previous problem involving brackets used to attach the 737's vertical fin to the main fuselage. Mechanics are diligently inspecting and repairing hundreds of improperly drilled holes on each aircraft, as West emphasised that a substantial workforce is dedicated to resolving this issue at both Boeing and Spirit.
While Boeing devotes significant resources to rectifying this quality lapse, West emphasised that the company still expects to achieve its free cash flow targets for the year and its longer-term goal of generating $10 billion annually by the middle of the decade.
The most recent quality lapse at Spirit, the company responsible for building the 737's frame for Boeing, appears to have roots dating back to at least 2017 and may necessitate inspections on more than 1,000 aircraft, as noted in a report by Rob Spingarn of Melius Research on September 5.
Spingarn commented, "The one program that Spirit had to get right now faces a potentially large, long-term liability."
Boeing delivered only 22 of its 737 jets in August and expects to ship approximately 70 during the third quarter, mainly due to the pressure-bulkhead issue, according to West. He added that around three-quarters of the 220 undelivered single-aisle jets in storage at Boeing as of the end of June could be affected, and the repairs are particularly intricate for completed aircraft.
Despite the recent setback, Boeing remains on course to generate between $3 billion and $5 billion in free cash flow for the year, although the cash flow is expected to be slightly negative in the third quarter.
West concluded, "We are firmly in the midst of a recovery. Recoveries tend to be characterised by uneven progress rather than a steady, linear trajectory."
Source: Business Standard
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