Boeing Should Ignore the Siren Call of Maximizing Cash

Boeing will be able to repair its finances quickly as it cranks up production and delivers more aircraft to customers. The company burned through $1.9 billion of cash last year, an improvement over negative free cash flow of $14.3 billion in 2024. This year, Boeing is expected to generate free cash flow, which are funds left over after paying all expenses such as taxes, interest and investments, of $1 billion to $3 billion.

The return to profitability puts the ball in the court of Chief Executive Officer Kelly Ortberg about what to do with the cash that will soon begin to gush in. Investing it back into the business should be the priority for a company that has been battered by a series of highly publicized failures, including the grounding of the 737 Max after the two fatal crashes in 2018 and 2019. Boeing lost a lot of ground to Airbus SE, the only other main producer of large commercial aircraft, during these troubles. The focus should be to catch up with Airbus and then extend its lead over its European rival.

This effort to recapture Boeing’s lead will require a lot of investment — first to increase production capacity, then to secure pending aircraft certifications and finally to design and build new airplanes. Boeing, though, dropped a not-so-subtle hint that its priority will soon be to return cash to shareholders instead.

Chief Financial Officer Jay Malave planted the idea at the end of his 15-minute opening remarks during Boeing’s earnings conference call on Tuesday that the company has the potential for annual free cash flow of $10 billion. This comment elicited the intended analyst questions and, when pushed, Malave went further and estimated that potential free cash flow was likely to be greater than $10 billion a year. It’s worth reiterating that the measure of free cash flow comes after subtracting capital expenditures. This is cash that can be used to repay debt, acquire companies, save for a rainy day, pay dividends and fund share repurchases. Less investment on projects to generate future sales and profit means more free cash flow now.

This zeal for driving up free cash flow by squeezing workers and cutting corners on aircraft development, which helped pay for record share repurchases, is the main reason the company careered off the rails and got into so much trouble in the first place.

The need to generate copious free cash flow will be justified at first to reduce Boeing’s debt. This is certainly valid. The company had $54 billion of consolidated debt at the end of last year. It also had $29 billion of cash and marketable securities, thanks in part to $10.6 billion of proceeds from the sale of the profitable Jeppesen and ForeFlight units. Net debt of $25 billion could be whittled down quickly with annual free cash flow of $10 billion.

Boeing has made tremendous progress since Ortberg took the helm in August 2024. On the same earnings conference call, Ortberg discussed how the company is building “a strong foundation” by stabilizing the business, ramping up production, working on aircraft certification and changing the culture, all of which “will position us to put our recovery behind us and restore Boeing to the company we all know it can be.”

Ortberg should be focused on taking back market share from Airbus and fending off any future threats, including China’s drive to produce commercial aircraft. This is a moment to plow money back into the business to expand on that foundation of increased production and new products. Ortberg’s legacy as Boeing’s savior will be etched in stone if the company catches and surpasses its main rival. His legacy will be written in sand if his goal is to squeeze out as much cash as possible now and return it to shareholders.


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Bloomberg News provided this article. For more articles like this please visit bloomberg.com.

Read more articles by Thomas Black