by Wolf Richter, Wolf Street:
$43 billion incinerated on Share Buybacks since 2012 to manipulate up the share price would come in handy now. Shares -60% since June 2019.
“We anticipate a workforce of about 130,000 employees by the end of 2021,” Boeing’s CEO Dave Calhoun told employees in a staff note. At the beginning of 2020, Boeing had 160,000 employees. This would mean a reduction of 30,000 employees. About 19,000 job cuts are already expected for 2020. So Boeing added 11,000 cuts to those expectations.
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The 737 Max, the misbegotten plane on which Boeing staked so much before two of them crashed, is still not flying. It has been grounded since March 2019, and the time when it was supposed to fly again keeps getting pushed out. Today Calhoun told CNBC in an interview that the company, in terms of getting the plane back into the air, was “getting very close to the finish line.”
“The Max has cost us a lot of money, and we’ve had to sort of up the ante with respect to liquidity to make up for the fact that we couldn’t ship the world’s most popular airplane,” he said. “Most popular” with whom, exactly?
Then came the Pandemic which clobbered the airlines as passenger traffic collapsed. Currently, air passenger traffic in the US is still down around 63% compared to a year ago, according to TSA checkpoint screenings. And airlines, which are in their own fight for survival, stopped ordering planes, cancelled what orders could be cancelled, and are in negotiations with aircraft makers to cancel more planes. Airlines really don’t need more planes of any kind at the moment. About $16 billion in new and grounded 737 Max planes are cluttering up storage lots at Boeing, awaiting delivery.
It is in this environment that Boeing reported third quarter results today:
Total revenues in Q3: -29% to $14.1 billion. First 9 months of 2020: -27% to $42.8 billion. Including:
- Commercial airplanes revenue: -56% to $3.60 billion in Q3; first 9 months in 2020: -54% to $11.4 billion.
- Global services revenue: -21% to $3.69 billion.
- Defense, space, and security revenue: -2% to $6.85 billion, now dwarfing commercial airplanes revenues.
Net loss: $466 million, or $0.79 per share. Year-to-date net loss: $3.5 billion; 12-month net loss: $4.5 billion.
Free cash flow: -$5.1 billion in Q3; -$15.4 billion in 2020 year-to-date; -$18.1 billion for the 12-month period; -$22 billion since Q1 2019 when the 737 Max fiasco took off, so to speak, with the grounding of the plane. A billion here and a billion there, and pretty soon….
Cash burn: In Q3, it burned through $5.3 billion in cash and marketable securities.
Total debt: $61 billion, up from $27.3 billion at the end of 2019. In other words, Boeing added $33.7 billion in new debt to survive this crisis and have lots of cash to burn through. This was what the Fed had in mind when it created the biggest bond market bubble and credit market bubble in history, sending investors chasing after any and all yields, and making it easy for companies such as Boeing to raise money (the Fed itself bought only a minuscule $15.8 million in Boeing bonds).
Remaining cash on hand: It still has $27.1 billion in cash and marketable securities, good to go for a while longer at this cash-burn rate.
Deliveries of commercial airplanes: 28 planes in Q3, down from 62 a year ago. Year-to-date: 98 planes, down from 301 planes a year ago.
Negative net orders: Due to cancellations so far this year, Boeing lost a net 381 orders for commercial airplanes.