In 2024, Boeing's shares experienced a downturn.
2024 was a tumultuous year for aerospace giant Boeing, with their shares diping by 32.1%. This rough patch was marked by a series of operational mishaps, industrial action, leadership changes, substantial cash outflows, and underwhelming airplane deliveries.
A Year of Trials in Commercial Aviation
The year started on a sour note with a high-profile incident involving a Boeing 737 MAX on an Alaska Airlines flight, causing renewed safety and quality concerns. Dave Calhoun, then CEO, decided to slow down deliveries to focus on quality control in the spring. Delivery delays were undesirable, but they were essential to assure the safety of the planes and airline passengers.
Things didn't improve much when autumn arrived, and a labor dispute led to strikes and the shutdown of production lines, impacting the 737 MAX program particularly hard. Boeing aimed to achieve an initial monthly delivery rate of 38 for the 737 MAX, but the strikes prevented them from achieving their goal.
Furthermore, there was unfortunate news in the widebody 777X airplane program. Initially, the 777X was expected to have its first delivery in 2020, but the timeline kept getting pushed back. Now, Boeing is hoping for the first delivery in 2026, which is both a burden for airlines waiting for the planes and an additional cost for Boeing in terms of inventory.
Defense Challenges
Boeing Defense, Space & Security (BDS) also faced its fair share of difficulties. The segment grappled with ongoing supply chain pressures and accumulated charges and losses due to problematic fixed-price development programs.
Fresh Start in 2025
Kelly Ortberg, an industry veteran, took over as CEO in August, while Theodore "Ted" Colbert, BDS's CEO, parted ways with the company in September. While Ortberg has a challenging task to turn Boeing around, the recent large order from Pegasus Airlines for the 737 MAX shows that airlines still have confidence in the company. The company's multi-year backlog for the 737 MAX, its ability to work through problematic defense programs (most of the defense segment revenue is profitable), and the ubiquitous demand for widebodies like the 777X indicate a promising future for Boeing.
If Ortberg can improve execution, Boeing may have a breakthrough year in 2025, as it works toward developing a new plane for 2035.
Enrichment Data (used sparingly):
Boeing's primary challenges in 2024 included supply chain disruptions, labor strikes, safety incidents, production delays, revenue decline, and cash flow impact. These challenges resulted in delivery delays, a significant drop in aircraft deliveries, and Boeing's worst financial performance since 2020, with an $11.83 billion net loss for the year.
The financial strain on Boeing was further compounded by inflationary pressures, supposedly adding to their expenses. Despite the difficulties, Boeing's backlog for the 737 MAX remained substantial, indicating a potential future blowout in deliveries. The money lost in 2024 due to the various challenges might push many investors to reconsider their investing strategies in Boeing's finance.
Investors might also be interested in Boeing's plans to develop a new plane for 2035, as this could present an opportunity for significant return on investment. However, the delays in the 777X airplane program have raised questions about Boeing's ability to execute on their long-term objectives in investing.
