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Boeing is delaying its latest jet as losses increase

The aircraft builder announced on Wednesday that it will temporarily stop production start for its 777X passenger jet, which it plans to start delivering to customers by the end of 2023. Demand for long-haul and widebody passenger jets, a key to Boeing’s commercial jet aircraft business, continues to be hurt by weak demand for international flights during the pandemic.

Demand for Boeing’s cargo aircraft has remained strong, so it will continue with the recently launched cargo aircraft 777X before starting production of the 777X passenger jet aircraft. Boeing will continue to build both the previous passenger and cargo versions of its 777 jet, known as the 777 Classic. These models will be replaced by the 777X.

Pushing back plans for the 777X passenger jet will result in a total of $ 1[ads1].5 billion in abnormal costs for Boeing, which will start in the second quarter and continue until production resumes.

The company also booked $ 1.2 billion in special fees in the first quarter, including a $ 660 million cost associated with higher supplier costs, higher costs to complete technical requirements and delays in completing jets to be used as the next Air Force One aircraft . It also includes $ 212 million in business disruption charges triggered by sanctions against Russia triggered by the invasion of Ukraine and a $ 367 million charge related to supply chain restrictions, Covid-19 and inflationary pressures on the Red Hawk military plane.

“It was a rotating quarter than any of us would have liked,” CEO David Calhoun said in an interview with CNBC.

Even with the exception of these costs, the company posted a core operating loss of $ 1.5 billion in the first quarter, far worse than the operating loss of $ 353 million that Boeing had in the first quarter of 2021. Analysts surveyed by Refinitiv had predicted a core operating loss of just $ 399 million in the quarter.

The company also had an 8% decrease in turnover to 14 billion dollars compared to the previous year. Analysts had forecast revenues to rise to $ 16 billion.

Calhoun said the company is still confident on the 777X, despite the problems. He said that the current certification process with the Federal Aviation Administration is one of the reasons to push the production of the aircraft back.

“We remain confident in the 777 program and our customers continue to see value,” he said in a note to Boeing employees. “Aviation programs have been serving our market for decades, and it’s important that we take the time now to position ourselves for long-term success.”

Boeing said it has taken an important step to restart deliveries of another widebody jet, the 787 Dreamliner, which has been halted since June 2021 due to quality control issues. Boeing revealed on Wednesday that they have submitted a certification plan to the FAA that will allow deliveries to resume, although they could not provide an estimate of when it will happen.

“Everyone would love that I gave you a date,” Calhoun said in his CNBC interview. “I can not do that because the FAA controls that process. We are confident and comfortable that we have delivered the best Boeing can submit.”

Shares of Boeing (BA)part of the Dow Jones industrial average, fell more than 5% in early trading on Wednesday.

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