Oct 26 (Reuters) – Boeing Co’s ( BANN ) ailing defense unit took a $2.8 billion charge on Wednesday, but the U.S. planemaker stuck to forecasts it would bring in cash this year despite labor and supply shortages as it struggles to ramp up production of commercial jets. .
Shares fell 4% at the bell as higher spending by Boeing’s defense, space and security division saw the company try to recover from a series of crises as demand for air travel rose.
Both Boeing and its European rival Airbus SE ( AIR.PA ) have ramped up production of narrow-body aircraft.
This helped it generate $2.9 billion in free cash flow during the quarter. During the same period a year ago, a cash burn of $507 million was recorded.
However, rising cost pressures over the past few months have hampered fixed-price contracts for US aerospace and defense firms, prompting an industry body to ask Congress for price hikes.
“Our revenue and earnings have been significantly impacted by losses on fixed cost development programs in our defense business,” Boeing CEO Dave Calhoun said in a message to employees.
The company has appointed senior troubleshooter Steve Parker to help turn around loss-making programs in its defense division, Reuters reported on Tuesday.
On the commercial side, Boeing delivered 86 Max planes in the quarter, or about 29 per month, company data showed. In the fourth quarter, the 737 MAX should deliver approximately 44 jets per month to meet its delivery plan of “low 400s.”
Third-quarter revenue rose 4 percent to $15.96 billion, but adjusted loss widened to $6.18 from $0.60 a year earlier.
“We also added more than 10,000 employees this year and are investing in their training and development to accelerate the experience curve and improve productivity,” Calhoun said.
“We’re not pushing the system fast enough in our production facilities,” he said, stressing the challenge for the aerospace industry.
Although General Electric ( GNE ) said on Tuesday it was seeing early signs of easing some of its supply challenges, the sector is facing persistent supply shortages, particularly shortages of workers and gauges.
by Abhijit Ganapavaram in Bengaluru and Rajesh Kumar Singh in Chicago; Editing by Arun Koiyur
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