Simone Del Rosario:

Boeing reported its biggest annual loss since 2020. The company is dealing with the fallout from manufacturing issues and a machinist strike that slammed production to a halt.

Here’s the damage: Boeing reported an annual loss of $11.8 billion in 2024. Still, the stock price was up nearly 5% midday Tuesday after its CEO said Boeing is making progress on plane production.

Kelly Ortberg:

the markets we serve are robust and growing demand for our core commercial and defense products and services remain strong. Our backlog of more than half a trillion dollars clearly demonstrates the value of our portfolio, and we’re focused on meeting our commitments and delivering safe, high-quality products to our customers.

Simone Del Rosario:

CEO Kelly Ortberg has some damage control to do after years of misfortune at Boeing. That includes kicking off 2024 with a harrowing Alaska Airlines flight where a panel blew off mid-air, leaving a gaping hole.

Ortberg came on in August. The fourth quarter of 2024 was his first full one at the helm. The aerospace giant reported a $3.86 billion loss during those three months when the company was deeply affected by a nearly two-month work stoppage.

Richard Aboulafia:

It’s pretty much expected. You had a 53-day strike, which of course had a profound impact on jetliner deliveries, particularly for their one really profitable program, the 737 MAX series. You also had sort of the ongoing hangover associated with some very aggressive defense contracts that have continued to deliver losses and will keep doing so. So you were bound to see a really not very good year at all in terms of cash and, well, that’s exactly what they delivered, but it wasn’t worse than expectations.

Richard Aboulafia:

I’m Richard Aboulafia, Managing Director at Aerodynamic Advisory, a boutique aviation and defense consulting firm.

Simone Del Rosario:

In 2024, Boeing was hit on both sides of the business. Commercial aircraft revenue fell 55% to about $4.8 billion. Meanwhile, the company’s defense, space and security business took a $5.4 billion loss for the year.

Boeing has been on a downward spiral since reporting record profits of $12 billion in 2018. The company has lost more than $30 billion since then, spurred by two 737 MAX crashes in late 2018 and early 2019. The 737 MAX was grounded after those crashes. Boeing’s woes continued with the COVID-19 pandemic in 2020.

During Tuesday’s earnings call, Ortberg reiterated his commitment to his four-part plan to get Boeing back on the right track. A big point was fixing Boeing’s culture.

Kelly Ortberg:

We’re going to help focus the teams on what it takes to make Boeing successful and promote a culture of unity and accountability by implementing a single enterprise score for all of our annual incentive plans. As I talk with employees, there’s a growing swell of excitement around restoring trust and getting their Boeing back, and they want to be a part of this turnaround.

Richard Aboulafia:

this is a bit of a baffler too, because it’s absolutely essential that he talk about changing the culture, and he has been doing that to his great credit. As they say, culture eats strategy for breakfast. On the other hand, when you come out and say, well, we’re firing 10 % of the workforce, we’re not going to give you any details, that’s a great way of continuing the cultural message that labor is really just an input rather than a partner, something to be squeezed for costs.

Simone Del Rosario:

In the wake of the company’s struggles, there have been talks that Boeing may spin off certain segments of the business. Late last year, reports claimed it was looking for buyers for its space unit. Now, a potential sale of its Jeppesen navigation business is drawing suitors.

Kelly Ortberg:

Part of that decision process is, what do you what do you do with something? You know, in some cases, you have potential that you could sell it, and there are buyers. In some cases that may not be a viable approach. We may want to just not continue with the next phase of the project, or something like that. So we’re going through that. But I think if I give you any guidance, think of it as more pruning the portfolio, not cutting down the tree.

Richard Aboulafia:

I think there’s lots of potential for selling off non-core businesses.

there is plenty of these auxiliary businesses relating to flight support, product support, parts distribution, whatever else that could be monetized. And they’d probably be wise to do so.

Richard Aboulafia:

I’d like to see much more discussion of your product development in the Jetliner business and a reinforcement of the engineering core.

And then on top of that, they have to do whatever they can, whatever is the art of the possible.to get these money losing defense programs back on track, even if it means more upfront losses, bringing in additional resources to bear, anything to avoid the endless grip program losses that we’ve seen over the past seven or eight years.

Simone Del Rosario:

Moving into 2025, the company said it’s focused on solidifying supply chains, ramping up production, and getting three planes through certification, the 737-7, 737-10, and 777X. For SAN, I’m SDR.