Prolonged Strike Inflicts Heavy Losses on Boeing

A lengthy strike has resulted in significant financial setbacks for Boeing, as the company grapples with a severe downturn in its financial performance. After 53 days of halted production, Boeing's management agreed to a substantial pay increase of 44% for 33,000 employees, allowing operations to resume. Following this announcement, Boeing's stock saw a modest increase of 1.5%. However, the newly released quarterly and annual financial reports reveal alarming losses.

In the fourth quarter of 2024, Boeing experienced a staggering 31% decline in revenue, totaling $15.2 billion, compared to the same period in 2023. The company transitioned from a $283 million operational profit last year to a staggering loss of $3.8 billion. This downturn translates to a loss of 125 cents for every dollar of revenue generated.

The operational cash flow plummeted from a positive $3.4 billion to a negative $3.5 billion, while the net quarterly loss skyrocketed from $30 million to an overwhelming $3.9 billion. These challenges stem from the prolonged strike, the subsequent agreement with the union, depreciation on unprofitable military contracts, and costs associated with recent layoffs affecting 17,000 employees.

Overall, Boeing's financial performance throughout 2024 remained bleak. The annual revenue fell by 14% to $66.5 billion, with operational losses nearly quadrupling to $10.7 billion. The operational cash flow exhibited a complete reversal, declining from a positive $6 billion to a staggering negative $12.1 billion. The net loss for the year escalated to over $11.8 billion, more than five times the previous year's figure.

Despite these financial challenges, Boeing reported having $26.3 billion in cash reserves at the year's end, juxtaposed against $53.9 billion in debt. This financial buffer was bolstered by the issuance of new shares and convertible bonds, which generated approximately $21.1 billion. Additionally, Boeing maintains an unused credit line of $10 billion, providing some relief amidst the turmoil.

Notably, only one segment of Boeing's operations reported profitability. The commercial aviation division delivered just 348 aircraft in 2024, a reduction of one-third compared to 2023, resulting in a similar drop in revenue. The operational loss for this division surged to nearly $8 billion.

Meanwhile, the military and space segment also reported increased operational losses, despite a slight revenue decline to $23.9 billion, leading to an operational loss of $5.4 billion. The only profitable segment was the services division, which saw a 4% increase in annual revenue to $20 billion, with an operational profit rising by 9% to $3.6 billion. Other income remained stable at $1.2 billion, while the annual debt service burden increased by 11% to $2.7 billion.

Looking ahead, Boeing's management refrained from offering specific guidance. The Federal Aviation Administration (FAA) has imposed production limits on the 737 Max due to ongoing safety concerns, capping output at 38 units per month. Boeing, however, did not meet this threshold in 2024. The company aims to reach this production level in 2025, hoping to persuade the FAA to lift restrictions to allow for increased production in 2026. These prospects may have positively influenced the stock market response earlier this week.