The Boeing Company (BA) Earnings Call Transcript & Summary

Okay. Good morning. I'm Doug Harned, Bernstein's Aerospace and Defense analyst. Today, I'm really happy to have with us Dave Calhoun this time in person, CEO and Chairman of Boeing.

I think to start out with, Dave, maybe you can take us back through -- you've been a little over 2 years in the CEO position. Maybe you can take us through some of the challenges you've seen and where you stand now?

Yes. Happy to do it. I don't get a chance to tell the story much, but I -- it is worth going back 2 years and for situational awareness, know what we -- what I and the new leadership team started with, it was in January '20. Everybody knows we had not yet recertified the MAX and we had missed a couple of our own deadlines to do it. And maybe way more importantly, the FAA took public exception to our laying out schedules and so forth with respect to that recertification. And it was, I think, a public demonstration of their frustration with the company, and it's the way it was handling that recert process. Maybe more importantly, at that point in the grounding, we had 385 airplanes on the tarmacs with our customers, and they were going to sit until this all got behind us. We had 450 of those airplanes on Boeing tarmacs because we had kept our production rates live and pretty much full out for the whole calendar year '19 and preparing for recert. So these were loads -- I mentioned that because it then took us almost a full year when we first set up our expectations internally, forget externally because we never called that out, but internally, we're probably 3 months later than we had hoped to be. Now COVID came along in that process, so I can't really fault anybody on the team. But we got there. And most importantly, the FAA administrator, Steve Dickson at the time, who was a pilot and he's a 737 pilot. Steve wanted to make a real statement with respect to the airplane and say, I'm not going to certify our [ team ] until I fly it. So it had a little bit of press to it. It was the very end of the year. They did it. And then sort of the real hard work starts, because what do you have to do, well, just this -- just the MAX [ side ] and I'll layer a couple of things. But -- the real hard work is, let's get our 380 planes at our customer premise up and flying. As you know, in the cert process, and we've learned, every day we learn, it's not just about the safety issue that caused it. It is coming current on every deferred action, every problem report, everything that's been learned about the airplane in its early years and make modifications to make certain that everything is up to date and compliant in the engineering spec. And that is a lot of work. And the best way to describe it is to do the mods on an airplane that we had already had in finished goods or on our customer premise, took as many hours as the assembly of a new airplane. So it's a big deal, and you have to assemble it in different locations, different places. So we started on that work, and we pledged a couple of things that to this day drive most of my thinking. Transparency, #1, like nothing gets to hide, nothing. And the only way to restore public trust is get the airplanes out, but don't ever, ever hide anything, any step of the way. And transparency is our one because it's a double-edged sword. You're going to do it to get the trust, but you're also going to create [ a habit ] along the way. And we've seen that and felt that. We are absolutely not moving off that one. And then public trust is our goal. That's it. Because you'll recall, on that day that when I started in the role, that was the big question. Who's going to get on one. That was the question. So the good news is shortly after we reached the cert, goal started in revenue service. And from the first day, those airplanes were packed, from the first day. And as long as we delivered every next airplane with the right reliability and all the quality dimensions attached we'd be okay. And we still believe that, and we're still in that philosophy. So spool it forward, where are we with the MAX, which is still the most labor and human resource consuming recovery that we have. We have out of the first 450, we have 240 of those airplanes still to be delivered. But we're a long way down that track. And very importantly, the work that we do on the mods is now sort of standardized and we're beginning to get a little more predictable on that front, and that's a big deal. And then the other part of this one is -- and of the 378, we have roughly 120 that are not yet up, and those are the ones that were at our customer premise and most of those are in China, mostly because they gave us the -- they didn't issue their directive until almost a year after the FAA. So anyway, all that process is going well, but we think about it as sort of one at a time and highly transparent. And if it's okay, on March, right after January, which was the situation, COVID springs. And a reminder for those who don't remember the point, COVID started in a nursing home in Washington state between the 2 biggest Boeing plants. That's where it started. The first shutdowns, the first freezes, we're right then and there. And needless to say, we spooled up all the safety hotlines, we did all the things you do to protect your people. That became now our priority. How do we do that? How do we make sure that we continue assembling and building airplanes, but at the same time, ensuring safety. And play COVID all the way forward. May of that year, we issued a forecast. Most people said, don't do that. But '23 and '24 is what we anticipated would be the recovery back to the '19 levels, the pre-peak levels. Truthfully, on the demand side, it's gone much faster than that. But on the supply side, it's gone much slower than that. And so we're in that -- what I call as supply-constrained world for quite some time and the impact of COVID is needless to say, what it is. When we started, 80% of the world's traffic stopped. We're now at the point where most is recovering, either the international. And China of course, is the one that's gripped in the down. And as you know, 10% of their flights are in the air. So we're at that moment where we just have to be patient and navigate our way through it. So those are the big overlapping ones, and there are plenty more, as you know.

Yes. So there's a lot of things to talk about here. But I want to -- I just want to get at one thing right away, which has come up with us, and it is the question of do you need to do an equity raise because it's something -- and we haven't seen why you would need to do one, but it continues -- we continue to ask this question. So...

And I don't understand it because I get it as many times as you do. Yet, the answer is no. There is no plan for an equity raise. And I've said to everybody, you'll recall when the window did open at the Fed, and we could lean into our credit. We went big, we raised $25 billion. That has proven to be a pretty good number, pretty good number. And it has given us plenty of cushion. And every month that goes by, we test liquidity every way we can think of, like the worst-case scenarios. Like forget what I just described, much worse than that. So I'm confident on the liquidity front. Cash flow is getting better every quarter. Brian described this as sort of a turning point year. And it is, and I also believe that. I can't measure it week-by-week or month-by-month or even quarter-by-quarter, but I know the year is going to be substantially better. Remember, I started with earning $20 billion in '20. And so it's progressively getting better. So we're at that stage now where we can start to quietly pay down debt. And I think if you ever did raise equity, you would want to know 87s are being delivered, right? You would want to know you have stability on your MAX line. You would want to know with certainty what's going to happen in China. And all those things are right in front of us. I get it, there are risks. But we're making progress on all of them. And those things when they get in the rearview mirror, then we'll stop and ask ourselves and evaluate whether equity is required. But it won't be a liquidity. It will be what's the smart thing, how far do we want to advance. And it won't be because I needed to build an airplane. It won't be that either. We've sustained our research programs, our development programs and -- anyway, so it's a long-winded answer to the answer which is really no.

Okay, got that. You were commenting on how the recovery is coming back better than you thought. One of the things that -- what you've seen is more challenging for you than for Airbus is that because you've had these delays, it's allowed airlines to make decisions to defer, cancel, make changes in schedule, whereas Airbus has still got people under contract. They [ can't ] kind of push them out. So right now, when you look at -- you had a pretty good MAX delivery month back in March. But are you seeing the demand coming back to a level that if you were not constrained by supply, your deliveries might be substantially higher than they are today.

Well, that's a giant If, but if you ask that question, yes, we would be bringing up rates at a fairly rapid pace, yes. As long as we can stay stable and deliver and that we're not supply constrained, but there are.

No, but I'm talking delivery rates -- first delivery rates rather than production rates. You're saying that delivery opportunities would be...

Big. Big and bigger. Right now, it's a relatively hot market, it is. And that's why I say this thing came back faster than we imagined it would, all because of vaccines. But yes, right now, it's a relatively hot market. We are trying to protect positions for all of our customers, and specifically China because we want to continue that trade. So yes, there's a lot of ways to talk about it and say it, but right now, demand is significantly better than supply.

Because there've been a lot of people that have suggested that Airbus will have a more dominant narrow-body position. And what we've seen, we've seen appraised values, things like that, certainly the MAX looks actually quite good right now. But we heard Ed Bastian earlier this week talk about how they're in negotiations with you on the MAX. I mean, how should we think about the potential for a ramp? And again, you may have some supply constraints, but can we see this headed back? What timeframe back to the levels you used to produce there?

So I'll try to answer the question, but I won't discuss time frames because that's where everybody gets in trouble. Right now on deliveries, because of supply constraints, if we can stabilize and continue to move our finished-goods airplanes, still over 200 of them in our possession. If I can stabilize and continue to deliver those alongside a stable 31 rate, advantage Boeing on deliveries for the next, I don't know, 18 months to 2 years. I view that as relatively significant. And to step back with respect to appraised values and so forth. The one thing I was confident on day 1, and I'm even more confident today is the ability of our airplanes to compete. Our airline customers, they measure this to the penny. They know the trip cost to the penny and they know the seat cost to the penny. And they measure them both because each time they go out for a procurement, Ed included, and then they make decisions on that basis. And the MAX performs incredibly well on both fronts. There are niches where we have advantage and niches where the other guy has advantages. But on the competitive front, and I personally sat across from customers in this process, I don't worry about product performance. And the MAX is actually outperforming its spec by a fair margin, especially on fuel. So anyway, yes, delivery, I think delivery is the competitive advantage if you [ have them ], for the next couple of years.

And you said 31 a month next 18 months, that would be a success. I mean what do you look at?

I hope it's better than that, but I'm not pulling a time frame.

No, no, I understand that. But what do you look at to decide when do I need the next rate break?

Stability. It's -- you guys watch every monthly delivery, so do I. We have to get stability with respect to month to month to month. What does that mean? What does that imply? That means we have adequate in-process stocks to support each and every delivery, all the standard work in station, blah, blah, blah. It's lot of lean practices, et cetera. But until we get to that, you make a rate break and add another 6 and form the supply chain, et cetera. And the supply chain, they know where we intend to go. So we're as transparent as we can. We'll also tell them when we're likely to make those breaks and that it's tied to the stability. And stability, they play a role in. So if they can help us get this stable, they can help us, and we can help ourselves get this stable, then we'll immediately entertain breaks. And we've already -- we're already discussing, of course, the investments required to add a line here or add that. That is -- that will be planned for and easy to pull the trigger.

Okay. Now on China, so it's been a while since the CAAC came back and gave their sort of safety approval. Now traffic has just been crushed there. You've got China Eastern, whole airline is kind of in lockdown in Shanghai. So where are you with respect to seeing those -- very hard to predict what's going to happen in China, but what are the dynamics here in terms of seeing the MAX airplanes start flying in China, the ability to deliver again? What has to take place?

So I remain confident and constructive. Why is that? Because we are in contact with our customers in China all the time. It's constant. And we are in contact with CAAC. The CAAC has never disappointed us. And we always knew they were going to take longer to issue their directive that we can fly again. But they did it almost on schedule. They said we could do it. And at the same time, they were certifying their own airplane, right? So it's been constructive with our regulator. And yes, the central government has to approve sort of the delivery process, meaning I know they're on an order, I know you've paid, even put money into them, you can't take them until x. And there is no doubt that the current shutdown is impacting that. Because what would you do with it if you got it? But we started up our Zhoushan facility, the finishing center, and we've gotten support from our customers in every front. So I just believe this is one of those we keep our heads up, we stay tuned, and wait for the moment where they need airplanes. And unfortunately, there's a pause on that.

Yes. And sometimes, it comes up that there may be political issues here, but it's just sort of strange for me. I mean, I think back to your prior life, I mean their own airplane has a GE engine on it, a CFM engine on it. The idea that you would actually break down among political lines, would do a lot of damage not just to Boeing in the U.S., but also to their own programs. And I'm just curious how the politics in China tie into the other issues. Is that minor? Or is it still a part of this...

So it's -- I'd like to tell you, I've got perfect insight, I don't. Is it a diplomatic battle? No. Everybody is saying the right things, doing the right things. I know we have support out of our administration despite the bigger rhetoric that's out there, does that impact things, maybe, maybe not. All we can do is just stand by our customers, stand by all of the investments that we've made. Derisk our delivery line. So as you may, when we started the year, we probably had 100 airplanes in sort of that risk in the year. We're down in the 20s. We could be as low as we want to be, and we don't want to be low because we want to protect our customers when they come out of these lockdowns. So that's the state of affairs. I do not have any particular insight on geopolitics. I don't think it carries as much weight as the world would like to think. I think we've just -- we've been victims of some serious timing issues.

One thing on the MAX is, you've got some customers that really want their MAX 10s, actually MAX 7s too. But can you give us a sense of where that certification path stands and how you're thinking about it?

Yes. So I think the big question is the ICAS requirement at the end of the year, so we might as well get straight to that. I am totally -- we, as a company, are totally committed to the Dash 7 and Dash 10. And our belief is that when that requirement was put in place and the legislation was formed, it was -- the reason there was a delay was for that to cover these derivatives. And the -- no one foresaw the certification process, extending, extending, extending for good reasons on both sides, Boeing and our counterparty. So -- but we are totally committed to it because it's a great airplane, and it's a safe plane. And it will be discussed on its merits every step of the way. It will be discussed on its merits by a regulator, with our regulator and ultimately...

You mean the ICAS?

ICAS. Yes, that constraint. But otherwise, yes, we are fully committed to [ use ] our airplanes. And we intend to deliver them to our customers. And I think we -- and certainly, the Dash 7s are on the timeline. I think, it's way doable, and we'll not contend with that.

Yes. With the MAX 10 if you end up in a situation where you have to go where they say -- because right now, it's really mixed. I mean we're seeing Senate and House come up with different commentary around this.

Yes. But it's -- let's not get to politics. It's work our way through the merits of the airplane with our regulator. That's the most important part of this one. It's the same airplane that we sell in other derivatives today. And our pilots will have a voice on safety, et cetera. In some ways because we accommodated a third angle of attack approach in some ways, in response to the Europeans' request. It's again, -- you always have to be careful the way you say things, but this is one of the safest families of airplanes ever, and this one just might be the safest. So that's how I think about it.

If we switch over to the 787, at last earnings report, you said that documentation was complete. It's into the FAA. There have been some headlines out there suggesting things could be incomplete. I mean I know there's always back and forth between the OEM and the FAA. Can you update us on at least how you're thinking about progress on the 787?

Yes, I've read those reports too, and like everyone, I run in with a microscope and ask everybody, it has been a transparent relationship with the FAA on this one since the word go. So this isn't to save it up and then boom, we'll hit them with it, and we'll win. That's not what this is. This is a back and forth. They've been involved in the process. They were involved in the setup when you apply. Think about it this way, et cetera, et cetera. We put it in. We're proud of it. There's always work to do post application. It's just -- it is what it is. We had a very clear response letter from them, clear in a very constructive sense and tone. Let's get this done sort of attitude. And that's the way it's been ever since. So that is the way it's progressing. And anyway, our confidence goes up submitting the app, knowing that we thought we understood what they wanted, et cetera, et cetera. Confirmation that, yes, we're moving down that path, I should be feeling better, and I do than the day we submitted it and definitely better than the period before we submitted it.

Did it make much difference with the leadership changes at the FAA?

No, no. Actually, that's been pretty seamless. Honestly, it's been very seamless. And that team is stepping up. And most of this work is done at the local offices. So our real relationship has to be built there. And it's like everything. I'll defend our team when I need to and they'll defend theirs. But we're not battling. It's not what this is. I think there's some pretty good recognition now over the last 2 years that we're going to be transparent, straight every step of the way. We can't do anything without them. They want to see American industry succeed. It's not -- this is pretty constructive.

Well, you have customers that want these now.

Customers are [indiscernible]. Yes, they are.

One thing that I see come up sometimes in -- you used to always hear this. Every conference, Airbus would stand up and Boeing would stand up and argue about market share. Who has the greater market share and people attending even counted differently to make themselves look better, it seems like. But right now, when you look on the narrow-body side, you're just fundamentally in a different production rate than Airbus is today and probably will be for a little while. How do you think about...

Not delivery rate, but production rate. That's important.

But how do you think about market share vis-a-vis Airbus? Is it -- is that something that really matters to you?

At this moment in time, it's less important. And why do I say that, because think of where we came from. That idea of the number of airplanes back in the air, all those things. We have to stay focused on doing that incredibly well, one airplane at a time. If I jump to a market share discussion immediately and say, let's get above 50, let's do it next year? What happens? The whole system gets crammed down in every way, supply chains get tested in ways that they can't perform, stability goes down. It's not a winning hand today. And in a supply-constrained world, it is definitely not a winning hand, in my opinion. So I am not going to run a public campaign on production rates and share targets. What I do know is our product portfolio across the board competes incredibly well. So while we talk about the narrow-body segment most frequently because that's where a lot of the cash flow is, in a wide-body world, when that product line up, as soon as I get stability in 87 delivery and we reinstate it, it is, I believe, I have a strong advantage. Strong advantage. So on balance, and you go back far enough. You remember that. It's going to get right back to that. I have to be patient. Our company has to be patient. We have got to work our way through these supply constraints. We have to be honest with everybody about it while we do, and yes, plan for rate increases, but only pull the trigger when the supply chain is ready.

And 777X, so it's been pushed back at multiple times at this stage. Can you update us on where that stands? And also, have you seen fallout from customers that are looking at that airplane and perhaps it's just become too late for them. You've heard some rhetoric out there, right?

So again, let's talk product families and let's all remember and know that they have 50-year lives. My view of the 777 family and specifically the X and there are passenger and freighter versions of these airplanes, it will find its way into a market where it is on its own. That wide-body world used to be a 3-way race between the 747, which we kept alive, maybe too long, but we did; the 380, which does not exist; and the 777. And now the 777 will be on its own, and it was the most efficient of all of them, anyway. And in its league, it offers advantages. You have to be able to fill it. But there's a big enough market. It's not a niche to be able to fill it, both with respect to passengers and freight. The market responds disappointment they couldn't get it sooner. Disappointment. Reengineer the deals to accommodate the new timeline went fairly quickly, not complete with everything, but pretty good. Interest in the freighter version, very high, very high. You saw Qatar launched it, Lufthansa jumped on it. There's a lot of good things going on with that freighter version. But we're playing the long game. I don't want to get caught in another cert race where everyone's trying to outguess as to when is it going to be? And what does it -- so like the first time we took the MAX cert out 9 months to a year from where it was previously scheduled, we put time in there for FAA discovery, for regulator discovery around the world, and that's what we've done in this case, given ourselves the right time and try to incorporate all these lessons that we've learned through these things. And I have to tell you, I've learned as many as anybody. I would have predicted things moving along a little faster when the first time you and I sat down together after I took the job. But things have changed. That process, it is harder. It's tough. And it's all -- in the end, it's good.

Certainly, sort of post '27 freighter market, when you have to deal with the environmental constraints, this should set up really well.

Sets up incredibly well, you're right.

Now one thing that has come up a lot has been, do you need to -- are you about to launch a new airplane? Now I've been around this myself a lot, and I certainly have not seen any of the ingredients in place that would catalyze that, but it gets asked a lot. So maybe you can tell us where you are on that thinking.

And I know you know where I come from, and I'll try to be as clear as I can be. If you go back in history on new airplanes, they were never really started until the propulsion package brought somewhere around a 10%, 15%, 20% improvement over the last one. That's not happening today. Now there are a lot of good ideas that are being tossed around on the subject of sustainability and new ways to power airplanes. That timeline is well out there, well out there, at least a decade from now, my view. And the incremental performance is narrow enough that you're not going to bet an airplane on that. So what do you bet on? The other, in my view, great advantage that can be had on airplane development is the use of a contemporary tool set to develop a true digital thread, right? Nose to tail that virtually builds it, virtually services it, where the service arm of your company can draw on the original drawings through that digital thread to perform at service and created standard procedures. Where the manufacturing facility, you can test the throughput virtually. Why am I bullish on all that? Because we've done it in a couple of our defense programs, and it's offering enormous advantage to us to be able to do it that way. Take cycle time out of the assembly line. That's not the big one. The big one is it takes a lot of learning, the number of tests you can run virtually on the design and performance of the airplane, the manufacturability and service, it just takes enormous time lines out of that. But we have to develop and mature the tools. So we have them. We've practiced them in several of our defense programs, some of which you see, some of which you don't. And we're very bullish on it. I had a review yesterday with the integrated team to discuss the status of those tools and what is the maturity concept. So to get back to the original question, at least a couple of years before I'm confident that those tools are tested and mature enough to implement on the next airplane. When that happens, then we design the next airplane. We don't do it the other way around. So I've always -- I felt strongly this way. You and anyone who has followed our industry long enough knows how hard it is to bring a new airplane forward and how many people we disappoint in the process, et cetera. Today's tools, our contemporary tools that we have today can eliminate a lot of that risk. And I want to -- I don't want to run forward until I get that. And by the way, we'll go back to the first set of questions around my confidence in our product line and its ability to compete. I'm confident, my sales team is confident. Our customers express confidence to me, so why would I rush? No good reason.

Yes, and when you think about this, the approach you're talking about, I can imagine having an impact on sort of nonrecurring in development, it could have an impact on manufacturing cost, maybe systems. But if you put aside that traditional 15% engine advantage type of a goal, you take that off the table, what are the things that one would see that would get you excited about that new airplane without the engine advantage?

And it's a fair question, and we will have to prove that test. But there are things you can compete on. Sustainability will be one, readiness for sustainable fuels, et cetera, et cetera, and the efficiency of the airplane itself; cockpit design; and a major step toward autonomy, a major step.

Now if you flip over to defense, you took a number of charges in Q1.

Yes, I did.

So can you help us understand how you're viewing these programs where the company obviously invested upfront? And now you're paying for that in a sense.

So the 3 programs that took the big hits, fixed price development. So we've learned a lot of lessons on that one, but I do want to sort of go backwards. We took a loss on 2 of them upfront, the day we signed the contract.

The Trainer and the MQ-25.

The Trainer and the MQ-25. MQ-25 is basically an autonomous refueling plane, carrier-based landings, et cetera. The trainer is designed, frankly, to be available and useful for all the services. We made those bets on big markets and follow-on opportunities. And if somebody said to me the first day that the charge would have been x plus what we just had to deal with, I would have been happy to say let's go. I would have been happy to say let's go. Those follow-on markets, and anyone can -- they can look for themselves what they are like, as in scale of work, they're big enough and they exercise enough of our technical development to be great returns for share owners, great returns for share owners, especially when you compare them to commercial development programs, right? You earn them sooner rather than later. The third one, the presidential airplane, it just is what it is. There are no follow-on opportunities, and we've learned a lot of lessons. And COVID really hurt. I say it, this is -- I'm not picking on anything. We accepted the deal. So we -- and we're going to deliver right airplanes. But COVID and clearances in combination are lethal to productivity. They just are. When a crew goes off and you can't replace it, you got a vacuum. And yes, all of the custom configurations, all those things, they begin to add up and they did. And anyway, so we got ourselves in trouble. I want to just mention this one in the context of another one which we haven't discussed, the tanker. Fixed price development. I saw one of the Air Force leaders say today, well, maybe we shouldn't have done that. Well, we did. I'm not speaking for them, we did. We took it on. It was as big an issue on my first day as the MAX. It just was. We had taken almost $6 billion in charges over time. It was hard, much harder to build and develop than we imagined. We were disappointing our customer. And I met with that Pentagon team, and they had faith in the design, but they were discouraged by where things were. Yes, I just said to them, this is going to end well. We're not giving up on an airplane, I don't care, how many charges we take. This isn't just me, it's our whole defense team. So why is that important? Because the defense department, we're never going to get contracting perfectly. We're going to learn a lot, they're going to learn a lot, it will get better. And hopefully, I won't take those kinds of risks, our team won't. We'll get smarter about that. But the one thing they have to be able to count on is we complete our designs, we develop them to perfection, and we introduce them to the warfighter in the best way we can. So today, I read 97% of the receiving airplanes are now ready and operable with the tanker. That is a big accomplishment. And I've listened to the warfighters and I've listened to the folks on the plane talk about how good it is relative to what it's replacing. And ultimately, it's satisfaction. They've stepped a little bit back from the notion that they were going to create another competition. So I never take anything for granted, but I want the defense department, our armed forces, the warfighters to know, I don't care what the charges are. We signed up to do a product, we're going to do the product. We're going to do it really, really well. And I think that's noticed. So -- and that applies to the Air Force One as well. These are going to be great airplanes that are going to serve the country.

One thing that's so difficult in defense because as we look at BDS and even the defense part of BGS, it's hard to -- not much transparency in there. And you and I were talking about this earlier. And so you've got a lot of things that are going on. Clearly, charge on the tanker is negative. It gets headlined. But then there's this big sort of tranche of business in there that's hard to see that is still generating large amounts of cash flow. And can you give us a sense of how we should think about the defense business and how -- like -- it's sort of like we're looking at an iceberg, and we only see the little top up there with these issues on it. How does the rest of it perform?

And that's fair, we owe everyone a much clearer picture of that, including our services franchise. Because when you do lay on the services on top of what is now just the development of new programs and plans, it's a very competitive business, and it does generate cash. There's no question about it. It reinforced its importance to the company in the first year of COVID and the second year of COVID because it did generate cash, and it generated it every quarter. And because the Defense Department was accommodating with respect to policy because of COVID, et cetera, on cash flow, we were beneficiaries of that. It matters. It was helpful. And it is a steady business despite what I described last quarter, and we do anticipate we will continue to get steady cash flow out of the defense business. And as you know, most of the development work is paid by them, the government. So it doesn't represent the same kind of investment risk that the commercial side does. So we'll take another stab because I think it's a legitimate question and it's not easy to find and understand the business in totality. But we love our classified work, I just -- we love it. I wish I could talk about it. I can't. I think it represents the best of the best in technology development, et cetera. We have some terrific programs, the F-15, and it's now -- it's used in the military in acceptance. Most of the surprises are to the upside with respect to the performance and the role it will play in the military. We have had MQ-25, we have the trainer. We've got all kinds of deliverable airplanes out there. We like all of those and they are cash accretive for us, and we hope it stays that way. And I do think this realignment around the world because of this recent -- not just threat, but invasion, that realignment is going to bolster things, I think, over the next 3- to 5-year timeframe.

Okay. One thing you talked about a little bit, I wanted to hit on, on a culture question. There have been a lot of issues over the last several years. I mean, well before the MAX issues, I would say, when you look at some of the things related to the tanker and so forth. Something that, I mean, that I have seen in my prior life, and we even wrote about, when 10 years ago, was this issue of transparency in management in that often you would have within the company, people that have been there a long time. And sometimes, you could have issues occur, and people would hope they just get resolved and the issue doesn't get moved up. And my sense is that a number of the things we've seen over the last several years have been a result of that, you couldn't get on top of it quickly enough. How do you think -- I mean, how do you see this? And how do you address it if you agree that's an issue?

Yes, I do agree that over my course of history, like yours that are sort of over those same 20 years, I see that. By the way, I see that in many big companies. It's just to what degrees, and I would say we were at the higher end of the degrees. And I agree with that. So how do you deal with it? And how do you gain transparency? We've taken an awful lot of steps in that regard, and not to mention the simple fact that every time I'm with a group and any time I'm with a leadership team, it's a -- late discussion on trouble is worse than trouble itself. We talk about that regularly. Am I completely ahead of it? Maybe not. But we're getting pretty damn close, in my view. Part of what we fixed is the -- after COVID, we took on a major transformation exercise. There are a lot of silver linings attached to that exercise. A lot of them. Some financial with respect to leverage when we get back to our volumes, but a lot of cultural ones, the elimination of layers in many ways. This last headquarters move, interesting. The real moves in the headquarters move is that in the second week of January when I started, I sent every operator back to their business. Second week. So the headquarters move was a consolidation of empty space as opposed to a -- some -- let's take everybody over here and move them over there. They'd already moved back to their work. Chief engineer went back to the engineers, chief manufacturing guy went back to the manufacturing plants, supply chain back into their businesses. Because now this group, they have to live with their work, they have to sort of enforce things, but it gives me visibility. I'm not sitting in a headquarters building yapping about averages. Averages say nothing about programs. I don't want to know how these 5 programs you're doing in aggregate. I just want to know each one. So let's go in. Let's dig deeper. So that delayering of the company, it was a significant part of our transformation exercise. The functionalization of engineering. If we have an engineering problem somewhere, and by the way, almost all of the issues we refer to were started in some kind of -- the engineering development is not going as well as it could. It's taken longer or we got a technical hurdle we got to get over. If that gets hidden early on and resources don't run to it, we don't get there as fast as we could. That functionalization, the visibility I have through the engineering arm today, it's dramatically different. It was designed, yes, in response to safety as a strengthening exercise. But it gives me lots of visibility in many other ways. So I think most importantly for you, I know what you're talking about. I agree with it. Transformation has helped us. It has helped me. My CFO has the same intensity around this subject of knowing everything so we can deal with everything blah, blah, blah. And we're running as hard as we can at it, we're running as hard as we can. And I think we'll come up the other end rather at the high end of that problem or be at the very low end of that problem.

Well, and that, I think when everyone here starts to think about where the company is going, what I come back to is, I mean, this issue seems to be fairly central. If I go back more than a year ago, I think there were some surprises on the 787 nonconformities, how extensive those turn out to be. But my sense is now that, and it may be what Brian West was saying about the inflection point, that we haven't seen sort of any new technical issues, quite some -- really since last summer, in quite some time in the MAX. I mean, you have the cert path, but I -- it's not as clear to me that there any of these things sort of hiding in the woods again. So...

So I'll describe this because it's a great lens on our company and the culture. Lot of introspection all during '20 on every other program in the company because there were questions from everywhere on subjects like this and safety and why loose things come up, et cetera. In conformity, not only did we not think it was extensive. We didn't think we had any issue. But the transparency message isn't just a message of let's share everything with the outside. Let's share everything inside. And we created a program called Seek, Speak and Listen. It would never be good enough for a leader to not have visited something and therefore, not known something about an area that matters. Their job is to go find it, seek, right? And we measure all of our leaders on this seek question. Conformity, 87 is absolutely a result of that culture shift because all those conformity issues, that was Boeing on Boeing, there were, I think. And what was it? It was a group in an area uncomfortable, that each and every airplane didn't meet the perfect spec that the engineering drawing called out. Uncomfortable that, that wasn't happening. Thoroughly evaluated for safety, in the old days, use as is determinations with FAA participation, that ended. That ended. So now you put your head down, you accumulate these. You tell everybody it's okay to tell us more. It's okay. And that went on for a better part of the year. And yes, since then, it is dried up. On the other hand, I tell everybody every day, is it over? I hope not. In other words, I want our culture, the very question you're asking, I want them to tell me everything. I want them to tell us everything. And if it speaks to conformity, then okay, pause, get in conformance, move forward. It matters. So transparency is double-edged sword. It's a great question and a very important lens, and I work on it all the time. I moved down close to Charleston, so I could work out of Charleston for a long period. And yes, I got it right here, and I saw it firsthand. And while somebody might [indiscernible] the conformity and its implications on safety and/or the airplane, we need to get that right for everybody. For the Confidence of our own people, confidence in the FAA and most importantly, the confidence of the flying public.

So now if we kind of pull back, I mean, what we've looked at here as we thought of the 2 big things. We talked about a lot of things, but 2 big things being getting that MAX ramp back up, deliveries and production and then 787 restart. So if I think of those 2 things, I know you can't give any exact timeline, but if I go back to cash and don't need to do an equity raise. You've got a lot of cash sitting there on the balance sheet right now, how do you think about the trajectory this year? Because you've got a plan for cash flow. You've got those 2 big items, the MAX ramp, 787 restart. How do you think about that playing out this year?

Well, this year, we've said early on, our intent is to get to cash flow positive, right? Our first half performance is well on that line. And so we feel pretty good about that. As you suggest, if we have our production lines running -- stable and running over the whole course of next year, things get a lot better. We intend, we've announced we're going to have an investor conference in September. Our intent is to try to drive some stakes in the ground on that front for next calendar year in sort of the what ifs and what we hope to achieve. And yes, things get a lot better fairly quickly when we get these 2 lines running and delivering airplanes into a fairly robust market.

And as you look to bringing that cash flow up going into next year, how do you parse out the way you use that cash? And I would include in capital investments as well as paying down debt.

Even today, even over the course of the last 2 years, again, I have the opportunity to look at all of our investment programs frequently. We're invested, I have had cert programs going for the entire period during these difficult years. If anything, added more resources to every one of them, every step of the way. So -- and as those then ultimately complete their certification process, it frees up a fair amount of resources to do lots of other things. So I don't think I'm going to have a call on new cash flow that's any different than the call on cash flow I've had for the last 2 years on the subject of development and research, et cetera. I look for breakout opportunities. I always do. Wisk was a breakout opportunity for us. I got a lot of questions about why Wisk, it's $1 billion right when you're starving for cash. Because we don't hesitate on the things that will matter to us. There's a whole lot of things about Wisk that are meaningful to us, not just a vehicle for helicopter displacement in urban markets and lots of markets around the world and/or local delivery service or whatever. It's not just a use case. It's autonomous from the word go. It's autonomous from the word go. We're up in the mid-2000s flights. Flights every day. We've tested under an enormous number of circumstances and we're designing now what we think will be the certifiable version, and our hope is that by '26 or '27, it's ready. And it just tests us on a lot of fronts. It will also begin to pave the way on what will pass FAA's cert in the subject of autonomy. What will pass? What will be the way we move into it. So I know it's a long-winded answer, but I don't think a big draw on positive cash flow next year has to happen for development. I think we're already on that game. And yes, it gets better. We're going to want to continue to whittle down debt and start moving.

Okay, great. Well, I think we're out of time here. But Dave, I want to thank you very much for being with us. Really enjoyed the discussion.

Always good. Thank you.