Boeing's (BA) CFO today outlined the steps the company is taking to address a series of issues affecting the safety and reliability of its planes (not to mention the company’s reputation).
“The events of Jan. 5, in Alaska Airlines Flight 1282 and everything we've learned since, we acknowledge that we need to improve upon safety and quality and conformance,” CFO Brian West said at Bank of America’s Boeing company conference, referring to the door blowout of an Alaska Airlines Boeing 737-9 Max jet. “And one area that we're focused on in particular is something called 'traveled work.' ”
“Traveled work,” as it is called in the aviation industry, refers to tasks that are "delayed and/or completed in a factory location other than what was originally planned,” as Boeing described in an internal document. With regards to the 737 MAX jet, Boeing was accepting fuselages and assemblies from Spirit AeroSystems, with workers noting that assemblies were not conforming to what Boeing was expecting, resulting in the assemblies being used in manufacturing then repaired after the fact.
“Starting on March 1 of this year, we will no longer travel work between Wichita and our fuselage supplier [Spirit AeroSystems] and Renton [Boeing assembly plant],” West said. “It had been going on too long. So now we will only accept a fully conforming fuselage from Spirit, which means in the near term, there might be variability of supply.”
In Boeing’s internal report noted above, the company said that traveled work resulted in tasks taking longer to compete in terms of labor hours, and that incomplete work can interfere with its ability to complete other planned work, causing cascading delays.
And with 737-MAX, Boeing workers apparently spotted these issues immediately when fuselages arrived from Spirit AeroSystems, per federal investigators as noted by the Wall Street Journal. It turns out Boeing didn’t fix the issues right away, and the 737 continued on to the next workstation.
When Boeing crews completed the repair 19 days later, the crews failed to replace four bolts on a plug door they had opened to do the job, resulting in the Alaska Airlines incident.
By pushing back on accepting defective Spirit AeroSystem parts, Boeing’s operations at Renton will be more efficient, and West said the company will eventually shut down two “shadow factories” the planemaker is using to fix non-conforming parts and assemblies. Boeing is also in talks to reacquire Spirit, which Boeing spun off nearly 20 years ago, to reintegrate both companies in what West said is best for safety and for quality.
The effect of these changes to traveled work and likely decreased fuselage supply from Spirit means Boeing will take a big financial hit. West said Boeing's free cash flow in Q1 will take a hit of $4 billion to $4.5 billion, more than the company had expected, and by year-end full-year free cash flow is expected to be in the “low-single-digit billions.” Boeing’s 2023 full-year free cash flow was $4.46 billion, which highlights the magnitude of Q1’s cash flow burn on the planemaker’s overall results.
In terms of plane production, West said 737 production would be lower in the first of the year, with the aim of production improving in the second half toward the FAA-approved 38 planes per month.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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