Boeing Company (The)

Thank you for standing by. Good day, everyone, and welcome to the Boeing Company's first quarter 2023 earnings conference call. Today's call is being recorded. The management discussion and the slide presentation plus the analyst question and answer session are being broadcast live over the internet. To ask a question on today's conference, please press the digit 1 followed by the digit 0 on your touchtone telephone. Again, it's 1-0 for questions. After pressing 1-0, you will hear that you have been placed in queue. Pressing 1-0 again will take you out of queue and may prevent you from being able to ask a question. At this time for opening remarks and introductions, I'm turning the call over to Mr. Matt Welch, Vice President of Investor Relations for Boeing. Mr. Welch, please go ahead.

Thank you, and good morning. Welcome to Boeing's first quarter 2023 earnings call. I am Matt Welch, and with me today are Dave Calhoun, Boeing's President and Chief Executive Officer, and Brian West, Boeing's Executive Vice President and Chief Financial Officer. As a reminder, you can follow today's broadcast and slide presentation at Boeing.com. As always, detailed financial information is included in today's press release. Furthermore, projections, estimates, and goals included in today's discussion involve risk. including those described in our SEC filing and in the forward-looking statement disclaimer at the end of the web presentation. In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of certain non-GAAP measures. Now I will turn the call over to Dave Calhoun.

Thanks, Matt. Good morning, everyone, and thank you for joining us. We had a solid first quarter. and we continue to make real progress, steady progress in our recovery. Challenges remain. There's more to do, but overall, we feel good about the operational and financial outlook shared last November, including cash flow and delivery ranges set for 2023, as well as for the 2025-2026 timeframe, where we can see $10 billion in annual free cash flow. Let's start with an update on our 737. Our team has been working hard over the last week. We've been progressing in our early inspection of defected airplanes. The issue is understood. It's isolated to two specific fittings, and we know what we have to do. The work will impact the timing of our deliveries over the next several months. However, we still expect to deliver 450 737 airplanes this year. Unfortunately, the timing of these delivery shortfalls will impact summer capacities for many of our customers. We feel terrible about that. Deliveries and production will be lowered near term, but we will recover over the coming months and we plan to increase our rate to 38 per month later this year. As mentioned last week, we're also not changing the supplier master schedule to ensure that they can keep pace. And we're comfortable adding parts inventory. Stepping back, We appreciate that Spirit promptly notified us of this issue. They're an important partner. We're working closely on the recovery plan, and we are working in a very constructive way. We will continue to work transparently with the FAA as always. As well, we will work transparently with our customers to support their fleet planning and scheduling requirements. As we mentioned last week, there's no immediate safety of flight issue, and the fleet can continue to operate safely. We will work diligently through this process together. We will prioritize safety. We will prioritize quality and transparency every step of the way. Taking a wider view, I couldn't be more proud of the MAX team and the progress that we have made. We now have over 1,737 MAX airplanes flying in the fleet. And since our return to service, the fleet has safely flown more than 4 million flight hours with exceptional reliability. And with respect to China, our focus has been and is on supporting our customers in their return to service. All MAX operators have returned to flying airplanes in service, and 45 of their 95 airplanes are back in the sky. In addition, the CAAC released their 737 aircraft evaluation report It's an important step toward the delivery of aircraft that are currently in Boeing's possession. We will follow the lead of our customers. Moving to BCA, I'll start with orders. Demand remains very strong across all of our product lines. We booked 107 net airplane orders in the first quarter. And on top of this, we were proud to announce major customer commitments earlier this year. Air India. One hundred and ninety seven thirty seven max twenty seven eighty seven and ten triple seven action. And Riyadh Air, the newly established airline in Saudi Arabia and Saudi. Ordering up to one hundred and twenty one seven eighty seven airplanes. On the subject of deliveries with strong demand, we're working to meet our customer commitments. We've delivered one hundred and thirty commercial airplanes in the quarter. including a strong month in March with 64 deliveries. However, variation in monthly deliveries remains high, and we still have work to improve stability. Of course, that starts with the 737, as I mentioned earlier. On the subject of production, we are also steadily increasing rates across key programs to meet the robust demand. and we'll prioritize our stability and not push the system too fast. And yes, we will pause when we are notified of defects. On development, we're progressing across all of our key development programs and certification timelines have not changed on the 737-7, 737-10, or the 777X. Now let me switch to BDS, Boeing Defense. In defense and space, we still have more work to do to improve our operating performance, but our portfolio is well positioned and our products are performing well in the field. First quarter results were impacted by the added cost on the KC-46A tanker program driven by a supplier quality issue that we previously shared last month. The good news is we understand it and we're progressing through that rework. On the operational side, the tanker is continuing to perform its mission well. Customers' decision on the KCY is a great opportunity for us, and it reflects the capabilities the tanker is delivering for the United States Air Force. On the demand side, we're continuing to see solid order activity. In the quarter, we booked key orders on the tanker, the Apache, and the E-7. In addition, we are accelerating the delivery of missiles and weapons in response to our customers' needs. We're also encouraged by the initial presidential budget request recently released. It's in line with our expectations, and our portfolio and capabilities are well positioned to support the needs of the nation and our allies, both in the short and the long term. Our defense business is well positioned and will continue to improve operational performance to more normalized levels. And Boeing Global Services, another very strong quarter. Solid, steady performance has enabled both commercial and military customers to keep fleets flying through a very dynamic time. The services business has now fully returned to pre-pandemic levels. I'm very proud of the team and the progress that they have made. All things considered across the businesses, We remain on the right path. We'll work through most recent max issue transparently and in partnership with our customers and our suppliers. We're focused on the long term and will continue to drive stability across the business and the supply chain. In our November guidance, we did not predict significant supply chain improvement until well into 2024. We remain in the same place today and share that same view. That said, we've seen improvement, and our line of sight is getting better every day. Demand is strong, and our portfolio is well positioned. We have a robust pipeline of development programs, and we're innovating in new capabilities to prepare for the next generation of products. Lots of work to do, but we're on track to restore our operational and our financial strength, and we still feel good about the outlook that we've shared both for this year and for our longer term. With that, I'll turn it over to Brian.