Industrials

Boeing has proposed funding its acquisition of partsmaker Spirit AeroSystems with stock rather than cash, according to people familiar with the matter, a last-minute twist in deal talks that comes as the jet maker burns through more than $1 billion a month. Boeing and Spirit, a jet fuselage maker it split off two decades ago, were closing in on an all-cash deal this weekend when Boeing switched to an offer consisting largely of company stock.

Boeing (BA) is expected to avoid criminal prosecution by the US Department of Justice for breaching a 2021 settlement agreement linked to problems with its 737 Max 8 model, which resulted in two fatal plane crashes in 2018 and 2019, The New York Times reported Friday, citing people familiar with the discussions. The Justice Department plans to offer Boeing a deferred prosecution agreement which will require the installation of a federal monitor to oversee safety improvements, the report said, citing the people. Federal prosecutors said in May that Boeing violated the 2021 deferred prosecution agreement by failing to establish an anti-fraud compliance program, prompting the Justice Department to consider criminal charges but officials have opted for an independent watchdog to expedite safety and quality improvements, according to the report.

Boeing (BA) has reportedly informed its suppliers of a three-month delay in reaching a key production milestone for its 737 jets, Reuters reported, citing two industry sources. According to the sources, the revised schedule now targets a production rate of 42 jets per month by September instead of June. Boeing expects a gradual increase in output, aiming for 47 jets per month by March 2025 and 52 jets per month by September 2025. Boeing’s decision to delay the production milestone suggests ongoing supply chain constraints, the report said.

New Boeing Supplier Schedule Calls for 737 Output to Reach 42 a Month in Sept (Previous Target June) – Sources.

Boeing had another month of muted jet deliveries as it grappled with supplier issues, increased regularity scrutiny and its own efforts to improve quality. Deliveries to China also are on hold amid a Chinese review of the batteries that power the planes’ cockpit data recorder. The airplane maker delivered 24 jets in May, 19 of which were 737 MAXs. Boeing had hoped to be rolling out close to 40 planes a month by now before fallout from the Alaska Airlines door-plug blowout in January slowed production. Boeing booked four orders in the month, all for its 787-10 wide-body jet

While Boeing (BA) still has to deliver more than 50 aircraft to All Nippon Airlines, it could still receive more orders from the Japanese carrier as it expands international flights, Bloomberg said Monday, citing All Nippon chief executive Shinichi Inoue. The report did not explicitly mention Boeing or Airbus, but did say the company is looking for widebody and single-aisle aircraft to fuel its expansion. “We will need aircraft resources to accommodate this growth,” Inoue reportedly told the news service during an interview at the annual IATA meeting underway in Dubai. The airline confirmed it has bookings with Boeing and expects “first Boeing 737-8 and 777-9 aircraft scheduled for delivery in fiscal 2025.” ANA has a total of 20 737 Max, 18 777-9 and 14 787 Dreamliners for delivery from Boeing, Bloomberg reported. Its fleet of around 240 planes has more than 80 Dreamliners.

Our 12-month target price of $147, cut $4, reflects a 26x multiple of projected 2025 EPS, in line with BA’s long-term historical forward average. We now see a 2024 operating loss per share of $0.31 (vs. our prior EPS estimate of $0.37) and cut our 2025 EPS estimate by $0.39 to $5.65. Today, BA noted that Q2 commercial aircraft deliveries are not likely to improve on Q1 levels, which were a woeful 83 units (including just 67 of the 737 MAX, BA’s flagship product). This jibes with our view (since February) that the recovery process from the Alaska Air flight 1282 incident could stretch on for a long period of time. We remain very skeptical that BA can achieve its goal of 50 units per month of the 737 MAX by 2025/2026. We think the FAA is likely to keep close scrutiny on BA’s facility floors and the ongoing process