2023-06-07 10:57:05 ET
Boeing’s ( NYSE: BA ) delayed deliveries of 787 Dreamliner airplanes will have a limited effect on its cash flow this year, analysts at Wells Fargo Securities said Wednesday.
The plane maker yesterday said it would slow deliveries of the widebody jet in the coming weeks after finding a defect in their horizontal stabilizers, a wing-shaped part on the tail fin. Boeing ( BA ) said the flaw didn’t present an immediate safety issue.
“With full-year deliveries and production unchanged, full-year cash impact likely [is] limited to the added cost of inspections, which [we] believe are minimal,” Matthew Akers, analyst at Wells Fargo, said in a June 7 report.
The bank estimated about $500 million of cash flow could shift from the second quarter into the quarter if Boeing ( BA ) doesn’t deliver any more 787s in June.
The plane has about 2.3 million parts, making a defect statistically possible, according to Wells Fargo, which estimated the U.S. Federal Aviation Administration has completed about 60 airworthiness directives for Boeing ( BA ) aircraft in the past year. The agency issues the rules to correct an unsafe or potentially dangerous condition in an aircraft, engine, propeller or other product.
“Most of these [directives] are for non-critical items, addressed during routine maintenance,” according to Wells Fargo. “While frustrating, we believe these issues are fundamentally different from the 787 composite material flaws that stopped deliveries for much of 2021-22.”
Before resuming deliveries of the 787 in August last year, Boeing ( BA ) addressed production and regulatory issues that came up amid more intensive scrutiny of its planes. Two fatal crashes of its 737 Max jet led to an overhaul of how regulators handle deviations from approved designs and federal rules.
“We continue to see strong cash generation for Boeing ( BA ) in the coming years, driven by ramping production rate, mature program mix and lack of new aircraft development,” Wells Fargo said.
The Paris Air Show, which this year starts on June 19, typically is a showcase of new orders for Boeing ( BA ) and European rival Airbus ( OTCPK:EADSY ) ( OTCPK:EADSF ). Boeing ( BA ) also may see a resumption in 737 Max deliveries to China as the country’s airlines cope with a resurgence in travel after the end of pandemic lockdowns, according to Wells Fargo.
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Boeing’s 787 delay to have small effect on cash flow: Wells Fargo