Boeing reports $6B loss as new CEO Ortberg touts labor deal

Boeing (NYSE:BA) on Wednesday reported a loss of $6.17 billion for the third quarter as new Chief Executive Kelly Ortberg said the troubled planemaker has lots of work ahead before it can build a newly designed plane.

In line with an earlier warning, Boeing (BA) reported a net loss of $9.97 a share on revenue of $17.8 billion. The company burned through $1.3 billion in cash, leaving it with about $10.5 billion at the end of September.

“We need to know what’s going on, not only with our products, but with our people,” Ortberg said in a memo to employees. “And most importantly, we need to prevent the festering of issues and work better together to identify, fix, and understand the root cause.”

He said the company must fix a broken culture, get smaller and improve execution on new plane models that have been delayed for years. Ortberg’s memo included remarks for his first earnings call.

Boeing (BA) in the past six years has worked to overcome two deadly crashes of its popular 737 Max jet, the pandemic’s effect on air travel and global supply chains, a criminal conviction, factory delays, a blowout of a door panel on an Alaska Airlines flight and a strike by 33,000 machinists.

“A 1% decline in sales for the entire company is not extremely bad, but it should be noted that the biggest part of the impact on the work stoppage will likely be felt in Q4,” Dhierin Bechai, Investing Group Leader for the Aerospace Forum, said in an email. “The results were not pretty, but with the challenges Boeing (BA) faces, a $2 billion free cash flow burn, while a lot, is actually quite OK.”

Union Vote

The union members vote Wednesday on a new contract proposal. Boeing (BA) needs to reach a deal with striking workers and restart factories that have been at a standstill since Sept. 13, Ortberg said. Boeing’s (BA) latest offer includes a 35% wage increase over four years, a $7,000 ratification bonus and increased retirement contributions, among other benefits.

As part of his work to improve Boeing’s (BA) quality culture, Ortberg said upper management needs to be more engaged with its sprawling operations. Management needs to be “on the factory floors, in the back shops and in our engineering labs,” he said.

Before joining Boeing (BA), Ortberg had retired after stepping down from what’s now known as RTX (RTX), formerly Raytheon Technologies. He spent most of his career at aviation supplier Rockwell Collins and became CEO in 2013. Rival United Technologies acquired Rockwell Collins in 2018

Boeing (BA) has moved its headquarters twice since 2001, each time locating further away from its roots in the Pacific Northwest. Executives including former CEO Dave Calhoun, the former human-resources head and the current chief financial officer lived in states outside its current headquarters in Arlington, Virginia.

Ortberg said Boeing (BA) must focus on a quality-improvement plan required by federal aviation authorities after the midflight incident on an Alaska Airlines flight in January. Investigators determined that Boeing (BA) workers didn’t properly secure a door plug used in place of an emergency exit before the plane left the factory.

Boeing (BA) also is grappling with delays on new planes including two new variants of the 737 Max, the 777X and key defense programs. Its last new plane model was the 787 Dreamliner in 2009.

“We have to be better at understanding and managing the risks on these projects more proactively,” Ortberg said. “This includes disciplined program and risk management in all phases of the project, including the bid phase.”