New Boeing CEO Aims for Leaner Operations Amid $6B Loss
Boeing’s new CEO, Kelly Ortberg, has outlined an ambitious vision for a leaner future as the company grapples with a staggering quarterly loss exceeding $6 billion. In his first earnings call with analysts, Ortberg emphasized the importance of streamlining operations and reassessing the company’s diverse business portfolio. His comments come as thousands of striking machinists prepare to vote on a new labor contract, raising hopes for a resolution.
During an interview on CNBC’s “Squawk on the Street,” Ortberg shared insights into Boeing’s strategic direction. “We’re going through a portfolio process right now to look at the overall portfolio and see what we want to look like five years from now. That may include streamlining certain things,” he explained. He stressed that no decisions had been finalized, but affirmed, “I think our core business of commercial aircraft and core defense products will always stay with Boeing.”
Boeing reported a third-quarter loss of over $6 billion, marking its largest loss since 2020, when the pandemic severely impacted aircraft demand. Chief Financial Officer Brian West indicated that the company would likely continue to experience cash burn through 2025, with hopes for improvement in the second half of that year. Despite initial plans for positive cash flow in 2023, Boeing’s shares dipped less than 2% during the earnings call.
Preliminary third-quarter results indicated revenue of $17.8 billion, down nearly 2% from the previous year, alongside a loss of $9.97 per share. The company faced significant charges exceeding $5 billion across its commercial and defense sectors and reported an operating cash outflow of $1.3 billion, leaving it with $10.5 billion in cash and marketable securities.
The commercial airplane unit reported losses exceeding $4 billion, up from a $678 million loss a year earlier. This increase was primarily due to delays in the rollout of the 777X wide-body aircraft, now pushed back to 2026, as well as additional delays affecting the 767 program. Boeing plans to cease production of the 767 once outstanding orders are fulfilled by 2027.
In the defense sector, losses reached $2.4 billion in the third quarter, compared to a $924 million loss in the same period last year, with charges linked to several problematic programs, including the KC-46 tanker and the Starliner capsule, which returned empty from the International Space Station this summer.
Addressing concerns regarding the Starliner, Ortberg highlighted the need for improvement in systems engineering and design capabilities to prevent future issues.
Boeing’s recent labor struggles have compounded these challenges. More than 32,000 machinists walked off the job on September 13 after rejecting a contract proposal that included a 25% pay raise. The latest proposal offers a 35% raise over four years, higher signing bonuses, and enhanced 401(k) contributions. The ongoing strike is costing Boeing approximately $1 billion per month, a situation that could threaten the already fragile aerospace supply chain.
As Ortberg navigates these turbulent waters, he aims to reset priorities and establish a more focused organization. “We need to reset priorities and create a leaner, more focused organization,” he stated, signaling a commitment to cutting unnecessary operations.
With the company facing an urgent need to resolve the labor dispute and return to full production capacity, the outcome of the labor vote is eagerly anticipated. Analysts are optimistic that the new contract proposal will gain approval, which is crucial for Boeing’s recovery and future growth. Ortberg concluded with a hopeful outlook, stating, “We have employees who are thirsty to get back to the iconic company they know.”
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Sources: AirGuide Business airguide.info, bing.com, cnbc.com