26 Jan 22. There is probably no other way of saying that Boeing FY21 results announced today make anything other than miserable reading but read between the lines and despite still facing a host of difficult issues, the company is working hard and accelerating progress. The good news is that FY21 revenues were up 7% to $62.3bn, operating losses declined from $12.8bn in FY20 to $2.9bn in FY21 and net losses have more than halved to $4.3bn. In addition, Boeing returned to positive free cash flow in Q4 and net debt at year end was down.
While 4th quarter operating performance is still far from being termed acceptable, Boeing full year results did at least show significant improvements on those of the same period last year particularly with net losses being halved.
The Q4 $4.5bn charge taken in regard of the unprecedented level of the 787 stoppage, due to manufacturing quality issues, is clearly very disappointing albeit given recent news flow this came as little surprise and sadly, to some extent, it obscured a long-awaited return to positive cash flow from increased 737 MAX deliveries.
Free Cash Flow in the final period of the year turned positive to $494 million from a negative $4.27 billion in the same period a year ago. Net debt fell $4bn to $58.1bn at year end and the total Boeing order backlog stood at $377 billion on December 31st after the company added 535 net commercial orders during the year.
For now there appear to be no end in sight to 787 production issues that Boeing is grappling with but then, this is a company that rises to its challenges and as Boeing CEO Dave Calhoun said in a separate message to employees, “While we never want to disappoint our customers or miss expectations, the work we’re putting in now will build stability and predictability going forward.”
Q4 operating loss of $4.54 billion contrasted with a loss of $8.38 billion in the same period a year earlier, when the company recorded a $6.5 billion charge due to delays in its 777X jet program. Boeing also said that the 737 was now producing at a rate of 26 aircraft per month, up from 19 aircraft in the previous earlier quarter and that it was on-track to reach production targets of 31 per month in early 2022. The company also said that it aims to increase its 777/777X production to 3 aircraft per month in 2022 – up from 2 aircraft per month previously – the increase being fuelled by orders for 777 freighters amid booming air cargo demand.
Revenues in Commercial Airplanes division rose 21% to $19.493bn and the loss from Operations declined from $13.847bn in FY20 to $6.4bn in FY21. Boeing delivered 340 airplanes last year compared to just 157 the year before.
Separately from Commercial airplanes, fourth quarter revenue in Defense, Space & Security decreased to $5.9 billion and fourth-quarter operating margin decreased to (4.4%) due to lower volume and less favourable performance across the portfolio. This included a $402 million pre-tax charge on the KC-46A Tanker program.
Full year revenue in Defense, Space and Security was $26.54 billion, operating earnings posted were $1.54bn and the operating margin of 5.8% was broadly unchanged on that of the previous year.
During the 4th quarter, the division secured an award for six MH-47G Block II Chinook helicopters for the U.S. Army Special Operations, a contract extension for Future Logistics Information Services for the U.K. Ministry of Defence, an award for modernization of Airborne Warning and Control System to the Royal Saudi Air Force, and contracts for proprietary space programs.
Defense, Space & Security also completed the first carrier tests for the MQ-25 unmanned aerial tanker and started flight testing on the second uncrewed Loyal Wingman aircraft. Backlog at Defense, Space & Security was $60 billion, of which 33 percent represents orders from customers outside the US.
Global Services – Q4 revenue increased to $4.3 billion and operating margins increased to 9.3 percent primarily driven by higher commercial volume and favourable mix despite margins having been negatively impacted by a $220 million inventory impairment.
During the quarter, Global Services secured a V-22 Performance Based Logistics contract for the U.S. Marine Corps, was awarded a contract for F/A-18 Landing Gear Repair for the U.S. Navy, and the company was also selected to provide Apache Attack Helicopter training and support services to the UK Ministry of Defence. Global Services also delivered its 50th 767-300 converted freighter.
Full year revenue posted was $16.3bn against a previous year $15.5bn and earnings from operation rose 348% to $2.0bn with corresponding margins up from 2.9% to 12.4%.
In his separate message to employees which I have repeated in full below – Boeing CEO Dave Calhoun said:
“As we share our fourth-quarter results, I want to thank you for your hard work and resilience. 2021 was a key rebuilding year for us, and together, we overcame significant hurdles. While we have more work to do, I am confident that we are well positioned to accelerate our progress in 2022 and beyond.
The industry’s mounting recovery has spurred solid commercial airplane demand. Order activity picked up significantly, particularly for the 737 MAX. In total, we booked over 900 gross commercial airplane orders including approximately 750 orders for the 737 family.
The 737 MAX is now safely flying in nearly every jurisdiction around the globe and the fleet is performing very well. With about 1,600 flights daily and more than 300,000 revenue flights completed since late 2020, the fleet is delivering reliability equal to or better than any fleet flying.
And with over 800,000 total flight hours since late 2020, the fleet has now flown more flight hours than it had prior to the initial grounding. We also delivered 245 737 MAX airplanes in 2021, and we’ve steadily increased production with a focus on safety and quality. We began 2021 at very low production rates, and today, are producing at 26 airplanes per month on our way to 31 per month early this year. Looking back at where we started, 2021 was a pivotal year for the 737 team.
We’re now applying that same disciplined and detailed focus to the 787 program. As you know, we are progressing through a comprehensive effort to ensure every airplane in our production system conforms to our exacting specifications. This effort continues to impact our deliveries and our financial results – but we are fully confident it is the right thing to do. I view the financial impacts of this work as a long-term investment in a program that has significant runway ahead. We are taking the time now to ensure we’re positioned well as widebody demand recovers. We’ll continue to keep you updated as we progress toward returning to 787 deliveries.
As cargo demand expands, we also booked record orders for new and converted Boeing freighters, including 84 orders for our 767, 777 and 747 freighters. Our Global Services team also announced 10 new converted freighter lines to meet the growing demand. Overall, our Global Services business showed great resilience, in part due to our well-balanced portfolio of both government and commercial offerings. This quarter, the team delivered our 50th 767-300 converted freighter and captured new commercial and government business valued at $6 billion. As the commercial market recovers, BGS is well positioned for growth in 2022.
In our defense and space business, we secured key orders and delivered on critical customer milestones. We completed the first carrier tests with the U.S. Navy for the MQ-25, started flight testing on the second uncrewed Loyal Wingman aircraft, and delivered 47 total aircraft including the first KC-46 for Japan and Norway’s first P8A Poseidon. We also generated $7 billion in orders in the quarter, extending our BDS backlog to $60 billion.
We took another key step in our overall recovery, notably in our financial performance, by generating positive cash flow in the fourth quarter, which represents our first positive cash quarter since early 2019. At the same time, the ongoing 787 activities resulted in financial charges that significantly impacted our earnings. While we never want to disappoint our customers or miss expectations, the work we’re putting in now will build stability and predictability going forward.
And looking to our future, we’re sustaining and expanding key investments, including in our people, in sustainability, advanced manufacturing, digital engineering, supply chain capability, technology development and partnerships.
We’ll stay squarely focused on safety, quality and transparency as we strengthen our culture and rebuild trust each day. While challenges remain, I am confident in our future. Our market is resilient, our team is world-class and we are taking the right, tough actions today to position ourselves for success. Thank you for all you continue to do to support our customers, our communities and each other”.
CHW (London 26th January 2022)
Howard Wheeldon FRAeS
Wheeldon Strategic Advisory Ltd,
M: +44 7710 779785