Boeing on Wednesday disclosed a heavy first-quarter loss as it wrote off $1.2 billion related to two defense-side fixed-price aircraft projects and the impact of the war in Ukraine.

The company also announced it will push out delivery of the first giant 777X jet at least a year to 2025 — a delay that it estimates will incur a further $1.5 billion in abnormal production costs in future quarters.

Boeing said it will pause 777X production in Everett through the end of next year to avoid building up more inventory — although no jobs will be lost as a result.

Speaking on CNBC Wednesday morning, Boeing CEO Dave Calhoun said the 777X production halt is necessary to stop “producing airplanes which we then may have to rebuild and rework.”

Boeing has already built and rolled out four flight test models and 20 production 777X jets.

After being briefed Monday by Boeing management on the delay, leading 777X customer Tim Clark, president of Emirates, said in an interview he remains committed to the jet.


However, he expressed doubts about taking the 787s Emirates has on order given the extended halt in deliveries of that airplane — even though Boeing offered hope Wednesday of a resumption of deliveries perhaps as soon as this summer.

London-based aerospace financial analyst firm Agency Partners summed up Boeing’s announcements in a note to investors as a “dreadful set of results” and wrote that the “general sense of disarray continues.”

Likewise, Rob Stallard of Vertical Research Partners called it “another dreadful quarter from Boeing.”

“What we think will really worry investors is that we keep getting MORE bad news,” Stallard wrote. “Just when you think things can’t get any worse at Boeing, they do.”

On CNBC Wednesday, formerly supportive stock analysts called for Calhoun’s firing.

Fixed-price defense contracts take a hit

The company recorded a net loss for the first quarter of $1.2 billion, or $2.06 per share.


Revenue for the quarter was $14 billion, well below the S&P Global Intelligence consensus estimate by analysts of $15.9 billion.

Boeing’s cash on hand decreased over the quarter from $16.2 billion to $12.3 billion. As a result, its net debt ballooned from $41.9 billion at the end of 2021 to $45.4 billion at the end of March.

On the defense side of the company, Boeing wrote off $660 million for the Air Force One transport jets, the two 747-8 aircraft it is modifying in San Antonio, Texas. It blamed this on “higher supplier costs, higher costs to finalize technical requirements and schedule delays.”

It also wrote off $367 million for the T-7 Air Force trainer jet under development in St. Louis, Missouri, “primarily driven by ongoing supplier negotiations impacted by supply chain constraints, COVID-19 and inflationary pressures.”

Calhoun in a memo to employees early Wednesday reiterated those factors, tying the supply chain disruption and cost inflation to the impact of the pandemic and the war in Ukraine.

And on an earnings teleconference with Wall Street analysts Wednesday he acknowledged that the fixed-price contracts for both Air Force One and the T-7 were very aggressive.


On the T-7, Boeing bid low in the expectation of losing money on the development phase but making it back later with follow-on orders for the jet fighter trainer.

On Air Force One, then-CEO Dennis Muilenburg did what current CEO Calhoun called a “unique negotiation” on pricing with then-President Donald Trump.

To ensure Boeing kept that prestigious contract, Calhoun said the company took on “a very unique set of risks that Boeing probably shouldn’t have taken.”

Boeing wrote off a further $212 million related to the invasion of Ukraine and sanctions against Russia.

Calhoun told employees that Boeing has “suspended engineering support, flight training and customer operations, as well as parts delivery and maintenance support services for Russian customers … (and) halted the importation of titanium from Russia.”

“While these actions had an impact on our business, they are the right thing to do,” Calhoun wrote.


Calhoun added that Boeing has “built up a substantial titanium inventory.”

“We have sufficient material and parts in inventory for production in the near-term and are working to ensure long-term continuity,” he told employees.

Lost production in Everett

The major hit to Boeing’s commercial airplane operations in Washington state came with the delay on the 777X. Delivery of the first jet is now scheduled for at least five years later than Boeing had planned when the jet was launched in 2013.

Calhoun told employees this was “based on an updated assessment of the time required to meet (Federal Aviation Administration) certification requirements.”

On Wednesday’s call with analysts, he said the FAA is now approaching all new airplane certification projects with new rigor.

“It’s just gonna take a little longer, it’s gonna be a little more thorough than it’s ever been,” Calhoun said. “We’ve got to give ourselves the time and freedom to get this right for the FAA.”


In the last quarter of 2020, Boeing took a massive $6.5 billion charge for the previous delay on the 777X, with entry into service then pushed out to 2023.

Then last May, the FAA warned Boeing that it wasn’t even close to meeting the safety agency’s regulatory requirements. An FAA letter informed Boeing that a realistic timeline for the agency to certify the 777X to fly passengers was late in 2023, which would have implied first delivery early in 2024.

In announcing the new delay, Boeing did not say when in 2025 it hopes to deliver the first airplane.

Clark, president of 777X launch airline Emirates, in an interview Tuesday said he met with Boeing executives in Dubai Monday who indicated it could be early that year.

Clark, whose original contract stipulated first delivery in April 2020, is skeptical after multiple Boeing schedule shifts and has told his staff to plan for the first 777X around July 2025.

Boeing has already built the first dozen 777Xs for Emirates and Clark said that by the time he gets the first one it will be a seven-year-old jet. “They’re basically second-hand aircraft,” he said. “We have to talk to them about that.”


With 777X production paused, Boeing will build only the 777F cargo jet through the end of next year.

In late January, Boeing Chief Financial Officer Brian West had said that because of high demand for cargo jets, Boeing planned to increase 777 production this year to three airplanes per month.

Production won’t now be boosted that much. Boeing said Wednesday it does plan to build more of the 777 freighter version but not until late next year.

However, Boeing spokesperson Jessica Kowal offered reassurance on the job impact in Everett.

“We do not anticipate any job reductions due to the 777X production pause,” she said. “In fact, we are continuing to hire to fill a wide variety of roles across the company.”

The market for big international long-haul jets like 777X is expected to recover very slowly from the staggering blow delivered by the pandemic.


While global domestic passenger air traffic in February was down just over 20% compared to the same month in pre-pandemic 2019, international passenger air traffic was still down 60%.

However, Clark said Emirates needs “a bow wave” of new planes mid-decade and is “hamstrung” by Boeing’s delays.

He said Emirates has been forced to allocate $1.5 billion to retrofit its current fleet of Airbus A380s and Boeing 777-300ERs to extend their lives into the 2030s.

“We will just eke those out until such time as we have confidence in the ability of Boeing to deliver the stream of aircraft that we want,” he said.

By pausing the 777X, Boeing can triage its engineering and certification resources to focus on two more pressing issues: the 787 Dreamliner and the 737 MAX.

Boeing is seeking FAA approval for its fixes to manufacturing defects on the 787 that have largely halted deliveries of that jet for 18 months.


And it’s trying to meet a year-end deadline to certify the final version of the 737 MAX — the MAX 10 — to avoid having to upgrade that airplane’s crew alerting systems.

787 and 737 MAX issues

On the 787, Calhoun in January indicated that a mid-April resumption of 787 deliveries was a reasonable expectation. Having already blown past that target, on Wednesday he at least offered hope that deliveries will begin again in the second half of the year.

“We have submitted the certification plan to the FAA,” Calhoun told employees, implying that Boeing believes it has a fix for the manufacturing issues and awaits only FAA concurrence.

Calhoun added that Boeing has completed the required work on the first few 787s and that company pilots are conducting check flights on those.

On CNBC Wednesday morning, Calhoun spoke from the 787 final assembly plant in South Carolina, saying “we have submitted the best that Boeing could submit. It’s thorough. It’s been investigated in every way.”

The airplanes visible behind him had been reworked. “This factory is humming and airplanes are ready to be flown,” he said.


“I’m confident that the FAA alongside our engineering team will work their way through this certification and we’ll be back in the air sooner rather than later,” Calhoun concluded.

Boeing said it now has 115 Dreamliners in inventory awaiting rework and delivery. Calhoun cautioned that even after the FAA gives Boeing the green light, the pace at which those can be delivered “will depend on the readiness of our airlines to get pilots ready, to get crews ready.”

Clark of Emirates has 30 Dreamliners on order in addition to 115 of the larger 777Xs. Emirates needs a giant airplane to eventually replace its superjumbo Airbus A380s and its 777-300ERs so he remains committed to the 777X despite the latest delay.

In the interview he expressed much more doubt about sticking with the 787s on order.

“Clearly they are at high risk to be delivered at any time in the contractual timeline,” Clark said. “So, frankly, I wouldn’t be surprised if we just drop those out of the mix completely.”

“We were due for delivery of our first aircraft in a year’s time and they’ve still got a backlog going back a year plus,” he said. “We’re reviewing the whole situation and seeing whether the 787 has a place in the fleet or not. We’ll let Boeing know accordingly.”


On the 737 MAX, Calhoun’s message gave no indication that the MAX 10 can be certified by year end.

A two-year deadline is embedded in the 2020 Aircraft Certification, Safety, and Accountability Act that if missed would require either a revamp of the MAX 10 crew alerting system in order to get certified or a Congressional waiver.

Calhoun told analysts that the legislation was never intended to apply to the MAX.

“So I believe our chances are good with respect to getting legislative relief,” he said. “It doesn’t mean we’ll get it. And if we don’t, it’s a problem.”

Pressure has grown on Congress to not grant the waiver and to demand such a cockpit systems upgrade.

With that issue still hanging, Calhoun touted considerable progress getting the earlier versions of the MAX into service.


“The 737 MAX is now approved to fly in nearly every country, and since late 2020, the fleet has safely flown more than one million flight hours,” Calhoun told employees. “We also steadily increased production and are on track to reach a rate of 31 per month in the second quarter.”

Though the grounding of the MAX was lifted at the end of 2020, Boeing said it still has 320 completed MAXs in inventory, awaiting delivery.

CFO West said it will take until the end of next year before most of the 787s and MAXs in inventory are delivered.

On the earnings call, despite the bleak results, Calhoun tried to sound optimistic about the future. He predicted progress in the year ahead and positive cash flow for the year overall.

“We believe we’re on a real improvement track with respect to engineering and manufacturing,” Calhoun said.

Clark of Emirates, while highly critical of Boeing management, said he still believes in the company. With Airbus and Boeing having a global duopoly on a growing airliner business, he said there is every reason to expect profits and success once Boeing gets beyond its current troubles.


“These are management issues, nothing but management issues,” he said. “As I pointed out to Boeing at great length the other day … they have a lot of internal work to do.”

“The business model is a good one. Boeing has a track record of engineering and aircraft excellence. I’ve watched their aeroplanes come out over the years. These have been marvels of engineering,” Clark added. “Any company is fixable.”

Today though, the market isn’t focusing on any light at the end of the current tunnel.

On CNBC, Jim Cramer and Jim Lebenthal, two stock pickers who have until now fawned over Boeing’s leadership and constantly promoted the stock to investors, pulled their support.

“This is just frankly the worst execution I’ve ever seen in my life,” said Lebenthal of Cerity Partners. “I am going to be blunt. Calhoun has to go.”

Boeing’s share price dropped sharply after the financial results were posted. It fell $12.58 or 7.53% for the day, closing at $154.46.