Boeing has just revealed the conclusion of years marked by substantial financial setbacks—a turning point for the firm following nearly seven years dominated by adverse reports.
The American aircraft manufacturer posted an $\$8.2$ billion net profit for the fourth quarter, marking its first profitable period in over three years, thanks to the divestiture of its air traffic management software division. This represents only Boeing’s third profitable quarter since early 2019, the year that initiated the 20-month grounding of the 737 Max aircraft following two fatal crashes claiming 346 lives. That grounding resulted in total core operating losses for Boeing amounting to $\$47$ billion.
However, this profitable quarter is not an isolated incident. Analysts project that the company will sustain profitability moving forward as production rates increase. Over the past year, the Federal Aviation Administration has eased production caps on the 737 Max that were imposed due to safety concerns. Furthermore, Boeing recently surpassed its rival Airbus in new aircraft orders for the first time since 2018, a significant milestone for a company that, despite its troubles, remains vital to the US economy.
CEO Dave Calhoun stated on Tuesday that the company is building momentum toward a full turnaround, restoring “Boeing to the iconic company we all know it can be.”
Boeing is the largest US exporter, one of only two suppliers of large commercial jets to American and global airlines, and a critical US defense contractor. The company supports 10,000 suppliers across 50 states, contributing an estimated $\$79$ billion annually to the US economy and supporting $1.6$ million jobs directly and indirectly.
Nevertheless, Boeing has been in a prolonged downturn, largely due to self-inflicted issues.
Initially, profitability was hampered by the 737 Max grounding, followed by sales deceleration impacted by the pandemic. The situation worsened two years ago after a door plug blew out shortly after takeoff on an Alaska Air 737 Max, reigniting scrutiny over its manufacturing quality and leading to federal caps on production rates.
“They still have work to do, but they have made very significant progress,” commented Richard Aboulafia, Managing Director of AeroDynamic Advisory, an industry consultant.
For instance, while Boeing leads Airbus in new orders, it lags in actual deliveries of finished jets. Deliveries are more crucial financially than new orders because payment is received upon the physical handover of the aircraft.
Boeing also still awaits FAA approval to certify two further variants of the 737 Max and the next widebody jet, the 777X, both systems being years behind schedule. Additionally, a potential strike this autumn by the Society of Professional Engineering Employees in Aerospace at its Washington state plants could halt production lines.
Boeing also needs to make headway in sales to airlines in China, which is a crucial market.
Orders there virtually froze in 2017 amid escalating trade tensions between the US and China during President Donald Trump’s first term. Reports of a major sales agreement with China in the near future have surfaced, but such a deal has yet to materialize.
“There are two types of problems—the problems they created themselves, and everything else,” Aboulafia noted.
He observed that Boeing has managed progress on the former category, but when it comes to factors like China’s trade relationship and the certification of new airplanes, “who knows? They can only do so much.”
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