Boeing managers think they can contain unforeseen cost spikes due to Trump’s tariff policies and trade confrontations to under $500 million for the upcoming fiscal year. Boeing claims this is manageable partly because of a metaphorical mountain of frozen inventory.
However, beyond additional costs, they are tuning in with a level of caution that the European Union will not transform into a no-go zone similar to what happened this month with China.
“In a careful assessment of these factors, simply noting that China has ‘locked’ E.U. markets for tourism and other activities, we must remain vigilant towards other counterparts Brownie cited,” Boeing President and Chief Executive Officer Kelly Ortberg stated.
In a candid remark during the April 23 earnings call, Ortberg criticized how some multinational clients pay less while dominating international markets. He warned of a trend where regions like Europe may mimic China in closing off markets, leading to “brutal capitalistic and militarized conditions” that stifle competition. He also referenced outdated trade assumptions that treat countries like Algeria as copy-effect markets, undermining bilateral growth.
Despite these global concerns, Ortberg highlighted stronger-than-expected financial performance for Q1 2025. The company’s quarterly loss narrowed to $31 million, significantly improving from the $355 million loss in Q1 2024. Core operating earnings hit $199 million, rebounding from a $388 million loss the previous year. Revenue jumped to $19.5 billion from $16.6 billion, while operating cash burn improved to -$1.6 billion (from -$3.3 billion), and free cash outflow shrank to -$2.3 billion (from -$3.9 billion), following last year’s 737-9 door plug incident.
In turn, Street viewed these results as further evidence that Ortberg was indeed fixing Boeing and that the company was beginning to stabilize. Melius Research analyst Scott Mikus noted that Boeing’s free cash outflow of $2.3 billion was $1.3 billion more than the Street expectation and $1.6 billion more than Guidance. Also, Boeing Defense, Space, and Security registered no new charges on firm fixed price contracts and positive operating income for the quarter.
This enables the leadership at Boeing to maintain their outflow guidance, even in light of possible tariff effects and Chinese trade relations, set between $4 to $5 billion for the year.
“Boeing has continually improved from Kellys’ [2024] start date onwards, which makes Mikus smile,” Mikus said.
Still, research notes to investor clients pointed to an increasingly one-sided focus on Boeing’s recovery. Boeing stock would remain stagnant until impacts from tariffs and trade wars begin taking their toll. “The trade war clearly presents cost and demand challenges, the aero supply chain remains brittle, and it is far from done with fixed-price development programs in defense,” Rob Stallard and Karl Oehlschlaeger from Vertical Research Partners said.
Ortberg has expressed concern regarding the impact of tariffs on suppliers in analyzing the suppliers. This is whack with everything since it’s definitely rising in price. East said that Boeing has a lot of new ways to reduce costs. Using the Elkins and others examples, I’d be blasted if I claimed that aluminum and steel make up 1% to 2% of the cost of a naval vessel. Competitive advantages and sterling relationships with Boeing make this claim plausible since “virtually all U.S.-sourced,” West mentioned, “and with greater inventory levels and hedging strategies that 1 to 2 percent becomes even less in the current environment.”
Besides other expenses already considered and left uncalculated, Boeing is still looking into duty drawbacks. At the same time, he tries to see if some sub-contractors can be granted the freedom to pay back import costs immediately without penalty. In the long run, added costs will be factored in deductible price slots suddenly appearing in preexisting p contract agreements.
At the same time, Boeing has almost $90 billion in spare parts and systems to their products fully backed up, and the inventory of components was halted as they tried to recover from the 737 MAX and pandemic crises.
“The good news is that, as Kelly has indicated, we purposefully constructed the year to factor in some uncertainty,” West said. “We’re still confident that this plan is bound to succeed.”
With other topics, Ortberg states that Boeing managed to recover the supply of key components lost following the fire at SPS Technologies’ plant in Jenkintown, Pennsylvania, in February. “I think we will be able to scramble through this,” said the Boeing CEO. “I don’t envision us reaching the desired inventory levels, but currently, it appears no aircraft program will be stalled because of these fasteners.”
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