Boeing takes $5 billion hit on much-delayed 777X jet program

By Dan Catchpole, Shivansh Tiwary and Allison Lampert

(Reuters) -Boeing pushed the first delivery of its long-delayed 777X jet program to 2027 and took a bigger-than-expected $5 billion charge on Wednesday, in another setback for the U.S. aerospace company.

The 777X is critical to Boeing’s long-term widebody strategy, previously dominated by its 747 and 777 jets. But repeated certification and production delays have pushed back deliveries by years, piling up charges of over $15 billion and straining the company's finances, while giving an opening to rival Airbus' competing A350 as international travel surges.

Last month, CEO Kelly Ortberg said the company was behind schedule in certifying the jet, saying a "mountain of work" needed to be done. 

The company has conducted over 4,000 flight test hours, more than twice the hours of a typical program, Ortberg said during a call on Wednesday with analysts, adding, "We still have a significant portion of the flight test certification program to go."

Analysts had anticipated a sizeable 777X program charge, which includes penalties owed to customers for late deliveries. 

WORRIES OF 'MORE SURPRISES'

Boeing shares fell 4%.

Richard Aboulafia, managing director of AeroDynamic Advisory, said the charge was more than the $2 billion to $4 billion he expected. While he does not expect the charge to be financially crippling to debt-laden Boeing, “it does raise questions about any more surprises to come.”

Ortberg told analysts the charge was large because he does "not want this to be a continuous quarterly issue for us," and it anticipates potential supply chain challenges. 

The delays and charges are partly related to Boeing's wait for a key milestone before final certification, two sources familiar with the matter said.

The U.S. Federal Aviation Administration was not immediately reachable for comment.

The wide-body jet market's supply shortage "is extraordinarily acute," CEO Aengus Kelly of the world’s largest leasing firm, AerCap,  recently warned. 

Lufthansa declined to comment on the 777X delays. Lufthansa has repeatedly lamented Boeing's delivery delays, arguing that the slowdown has stopped the carrier from renewing its aging fleet and cutting fuel costs. 

Boeing's free cash flow of $238 million turned positive in the quarter for the first time since 2023. Boeing's deal with the U.S. Department of Justice to avoid prosecution related to two 737 MAX crashes saved the company roughly $700 million in fines it had expected to pay this quarter.

YEARS OF QUALITY ISSUES, DELAYS

After years of grappling with quality issues and production delays on its flagship 737 MAX, Boeing cautiously ramped up monthly output this year. 

The company has decreased work done out of order, an indicator of production quality, by 75% on the 737 program and by 60% across all programs, Ortberg said. 

Earlier this month, the company received the long-awaited approval from the FAA to increase 737 MAX production to 42 jets per month from a cap of 38 that had been in place since a January 2024 mid-air panel blowout on a nearly new aircraft.

Boeing is already loading the 737 line at a rate of 42 aircraft a month, Ortberg said. "I'm planning that we will exit the year very soundly at the 42-a-month rate," he said. 

The company continues to work on certifying the 737-7 and 737-10, the smallest and largest versions of its best-selling 737 MAX.

Boeing plans to increase output of its 787 Dreamliner from seven jets a month to eight in the "near future," Ortberg said. 

The company plans to double its manufacturing footprint at its North Charleston, South Carolina, plant with goals to ramp up 787 production beyond 10 jets per month. Certification delays for premium seats from suppliers continue to dog the program, a headache shared by Airbus, Ortberg said.

Boeing posted an adjusted loss of $7.47 per share for the quarter through September, compared with analysts' average expectations of a $4.59 loss, according to LSEG.

Its revenue for the quarter rose 30% to $23.27 billion, above expectations of $21.97 billion. 

Boeing Defense, Space and Security revenue beat analysts' expectations by 10%, despite a 13-week strike by factory workers that has delayed fighter jet deliveries. Seventeen members of the U.S. House of Representatives, including one Republican, wrote to Boeing on Wednesday, urging the company to resume negotiations with the union.

(Reporting by Shivansh Tiwary in Bengaluru and Dan Catchpole in Seattle. Additional reporting by Allison Lampert in Montreal, Joanna Plucinska in London, and Padraic Halpin and David Shepardson in Washington; Editing by Sriraj Kalluvila, Nick Zieminski, Rod Nickel)