Boeing Wary Of Europe Closing Off Like China

Boeing managers believe they can limit sudden cost increases from Trump administration tariffs and trade wars to below $500 million this year, which they say is manageable due in part to a proverbial mountain of backed-up inventory.

Beyond new costs, however, they are warily watching whether other foreign markets, such as the European Union, become no-go zones like what has happened this month with China.

“The one thing that we have to watch is to make sure we don’t see more countries in a similar boat as where we are with China. We’re watching the EU,” Boeing CEO and President Kelly Ortberg said.

What is more—and in a rare direct reference to Boeing’s archrival Airbus and Ortberg’s counterpart, Airbus CEO Guillaume Faury—the Boeing CEO volunteered the whole industry would rather the marketplace remain tariff-free as it has since the 1979 Agreement on Trade in Civil Aircraft. “I would agree with you wholeheartedly that both Guillaume and I would welcome a nontariff fixed environment for both of us,” Ortberg said.

Ortberg made the comments to financial analysts April 23 while delivering better-than-expected financial results for the first quarter (Q1) of 2025. Net loss for the latest quarter was $31 million, compared with a $355 million loss the year before. Core operating earnings of $199 million towered over a $388 million loss in Q1 2024. Revenue in Q1 2025 was $19.5 billion against $16.6 billion a year ago. Operating cash burn of $1.6 billion and free cash outflow of $2.3 billion in the latest quarter—while still red—were significantly under the $3.3 billion operating burn and $3.9 billion free cash outflow the year before when the 737-9 door plug blowout accident occurred.

In turn, Wall Street analysts applauded the results as proof that Ortberg is fixing Boeing, and the company is steadying. Melius Research analyst Scott Mikus said Boeing’s $2.3 billion free cash outflow was $1.3 billion better than the Street’s consensus and $1.6 billion better than management’s previous guidance. Notably as well, Boeing Defense, Space and Security did not register new charges on firm, fixed-price government programs, and it recorded positive operating income for the quarter.

All of this allowed Boeing leaders to reaffirm their full-year target of a $4-5 billion free outflow, despite potential tariff impacts and trade tensions with China.

“Kelly took the reins at Boeing in August [2024], and the turnaround has been astounding so far,” Mikus said.

But in notes to their investor clients, analysts were quick to caution against irrational exuberance over Boeing’s recovery, because effects of the tariffs and trade wars are only just beginning to materialize. “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,” said Rob Stallard and Karl Oehlschlaeger of Vertical Research Partners.

Ortberg and Boeing CFO Brian West acknowledged that some suppliers to Boeing already have warned of rising prices due to tariffs. “The thing I’m really trying to make sure we’re focused on is making sure that an argument over a 10% tariff—who’s going to pay—doesn’t turn into a continuity of supply issue,” Ortberg said. “We really need to make sure that people are buying and bringing in the parts that we’re going to need, and then we’ll work through the financial implications.”

West said Boeing has a slew of options to exercise to hold down new costs. For instance, aluminum and steel are typically just 1-2% of the average cost of a large commercial aircraft. Already it is “virtually all U.S.-sourced,” West said, “and with higher inventory levels and hedging strategies, that 1-2% is even lower in the current environment.”

Boeing also is looking at duty drawbacks, and it is investigating whether it can include or cover some suppliers in recouping immediate import costs. Longer term, increased costs would be incorporated in price escalators included in common contracting. Meanwhile, Boeing can count on almost $90 billion in backed-up inventory of parts and systems for its products as it struggled to recover from the dual 737 MAX and pandemic crises.

“The good news is that, as Kelly said, we deliberately built the year to account for some unknowns,” West said. “We’re still comfortable with the plan that we’ve outlined.”

On a separate issue, Ortberg said Boeing appears to successfully be backfilling supply of critical parts supply lost after SPS Technologies’ factory in Jenkintown, Pennsylvania, burned down in February. “I think we’re going to be able to scramble our way through this,” the Boeing CEO said. “I don’t think we’ll be at the inventory levels we want, but I don’t see right now that any aircraft program is going to be held up over these fasteners.”