How Boeing’s Assets Help Weather the Storm of Lawsuits and Regulatory Restrictions
In this month’s Finance ‘In-Action’ we’ll look at the challenges facing Boeing and how they relate to the Balance Sheet, Income Statement and Cash Flow Statement.
“Boeing Co. predicted a massive cash drain for the first quarter as regulatory scrutiny and slower output of its 737 Max jetliner following a January mid-air accident take their toll on its finances.”
“Regulators have capped production of the 737, Boeing’s largest source of cash until they’re satisfied Boeing has a firm grasp over the quality of work in its production system.”
As of December 31, 2023 (Fiscal Year End), Boeing had approximately $13 billion in cash and cash equivalents1. This cash balance will be reduced (“drained”) due to compensation costs stemming from the Alaska Airlines incident where a Boeing aircraft lost a fuselage panel in midflight2.
Additionally, lower profitability will impact cash balances, due to a reduced level of sales from the regulatory caps, which results in less revenues contributing to gross, operating and net profits.
While the compensation costs (settlement) may be treated as an extraordinary item, how the regulatory caps (restrictions on revenue) are classified in the financial statements will be determined in their next quarterly report on April 24, 2024.
Boeing Sees Massive Cash Drain as 737 Max Episode Takes Toll, Bloomberg, March 20, 2024
1. Boeing 2023, Annual Report. 2. Alaska Airlines blames Boeing for blowout, wants out of passenger lawsuit, Lauren Rosenblatt, The Seattle Times, March 14, 2024. Update on Alaska Airlines Flight 1282 and the 737-9, Boeing Website, March 20, 2024. Boeing Halted From Further Max Production Increases by FAA, Ryan Beene and Julie Johnsson, BNN, Bloomberg News, January 24, 2024. Why Boeing’s Problems with the 737 MAX Began More Than 25 Years Ago, Bill George, Working Knowledge, Harvard Business School, January 24, 2024.
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