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Boeing
BA
expects to work through the many problems in its commercial airplane and defense businesses by 2026 and start returning cash to investors, but CEO David Calhoun said the company won’t develop a new jetliner in the next five to six years – and will only roll out one in the middle of the next decade if it has technology to significantly improve fuel efficiency and reduce carbon emissions.
In a presentation for investors Wednesday, Calhoun said the extent to which the company can reduce emissions “might be the long pole in the tent” for when it rolls out a new middle-of-the-market airliner, which analysts believe Boeing needs to compete with Airbus’ hot-selling long-range single-aisle A321XLR. If Boeing can’t deliver much greater efficiency, “we may not do it,” Calhoun said.
Boeing’s next airliner may be designed to fly autonomously, Calhoun said, though it may not operate without pilots from the start. He said that Wisk, a California-based company Boeing owns a controlling stake in that’s developing a four-seat autonomous electric vertical takeoff and landing aircraft intended to serve as an air taxi, is the company’s key avenue for developing autonomous flight technology.
Calhoun said he doesn’t expect air taxis to be big sellers and “won’t move the needle,” but bringing Wisk’s aircraft to market will “educate the FAA” on how to certify the safety of autonomous aircraft, paving the way for the use of the technology in higher impact ways.
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Calhoun and CFO Brian West sought to provide Wall Street with a more detailed forecast for the first time since before the grounding of the 737 MAX in 2019, elaborating on their declaration in their discussion of third-quarter earnings last week that they were emphasizing free cash flow as the key metric.
The company expects to deliver the last of the 737 and 787 airliners that have piled up in storage in 2025, removing the heavy financial drag of storing and refitting them. West said he expects that to enable Boeing’s commercial airplanes division to return to being a “cash juggernaut” generating $6 billion in free cash flow. Together with Boeing’s defense division swinging back to positive cash flow as it works through costly problems with fixed-price government contracts, the company expects to generate roughly $10 billion a year in free cash flow by the 2025-26 timeframe, enabling it to pay down debt and normalize the balance sheet and begin to return cash to shareholders again.
Given that Boeing is sitting on abnormally high level of inventories — 270 finished 737 MAX planes and 115 787s worth roughly $23 billion – handing them over to customers to hit its free cash flow goal will be “easy … even if everything else goes wrong,” analyst Ronald Epstein of Bank of America
BAC
wrote in a note earlier this week. A short-term focus on free cash flow under prior CEO Dennis Muillenburg was one of the contributors to the many troubles the company has been struggling with, including the 737 MAX grounding, 787 quality problems and losses in its defense business, he points out. “Changing the culture that ultimately resulted in the company needing to be turned around in the first place is arguably much harder.”
Boeing shares were up 2.5% to $147 in midday trading.
This article will be updated as Boeing’s investor day presentation continues.
