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Boeing earnings descend, thanks to inflation and lingering supply chain problems

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The Boeing nameplate on its regional headquarters in Arlington, Virginia.

Because Boeing had fixed price points with the U.S. government, it couldn't pass along price increases it paid to vendors. Olivier Douliery/AFP via Getty Images

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Another entry in the litany of bummer Wall Street earnings calls: Boeing’s. The aerospace company told investors Wednesday that it lost $3.3 billion last quarter. CEO David Calhoun said defense contracts were mostly to blame and that “turnarounds take time.”

So what might that turnaround look like? And how much time are investors willing to give the company?

Turns out making an airplane takes a lot of parts, which means a lot of manufacturers need to provide those parts when you need ‘em.

“You can think of it almost like a spring unwinding,” said Samuel Engel, a senior vice president with the consulting firm ICF. “You have one small supply chain shortage at level three, which turns into a bigger supply chain shortage at level two, and then suddenly you’re missing an engine for a new 737 Max.”

Boeing is struggling with its supply chains like everyone else, Engel said. “But when Boeing struggles with supply chain challenges, it’s very expensive.”

Boeing CEO Calhoun said the company took the biggest hit on defense plane contracts. They have fixed price points, which means they can’t just tell the customer — in this case, the U.S. government — that it needs to pay more because of inflation. 

“And as everybody who went to the grocery store, the gas station lately, you can tell that prices are really jacked up quite high,” said Art Wheaton at Cornell University. “And unfortunately for Boeing, they can’t pass along those price increases.”

But it’s not all bad news for Boeing. The company reported that it generated almost $3 billion in cash in the third quarter, which means it will likely end the year with positive cash flow.

“The good news is that the commercial aviation recovery is quite strong. So demand is heading up too,” said Richard Aboulafia, managing director at AeroDynamic Advisory.

Whether Boeing has the capacity to keep up with that demand is unclear at this point.

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