Tom Gentile: Yes. Well, let me just address the forward loss issue. As you said, on 737, the impact will be positive on 87 and 220. In terms of the forward loss, we’ve taken into account the projections in terms of the schedules going forward going up. So that has all been taking into account in terms of the forward loss. In terms of the Boeing payment being below the line, that is how it is. But what was the second part of your question then, Cai, the second part?
Cai von Rumohr: Well, I mean, so with those three programs building, presumably the cash loss as you move forward, increase’s. That’s why you took the forward loss. And then you do have the Boeing payments and you have the cash payment to Airbus, at least the cash that you don’t get. So, over the two-year period, will you be able to reduce your overall net debt.
Mark Suchinski: Yes, Cai, let me jump in real quick. So, I think first off, we do have loss-making programs. We talk about those. I would tell you that the amount of burn on those cash — those forward loss programs in 2023 will be higher than 2024, right? Even though we’re going to produce more in 2024. We started to ramp up on 787, we didn’t restart production until August of last year. And we had a lot of units as we slowly started to go from one to three to five, a lot of higher costs, way up on the learning curve, the build process changed. So, we’re seeing an abnormally high cost per unit build on 787 in 2023. And you’re seeing some of that reflected in the additional forward losses that we booked in the first and second quarters.
Very similar on A350 as we recovered the production plan from an overstaffing standpoint to recover that expedited boats that is all putting additional pressure on what I would call cash per unit on the loss-making programs in 2023. And then as we move into 2024, what should happen is we’re moving down. We’ve got more stability in those factories. The higher rates will help us absorb more fixed costs. Some of the pressure that we saw in 2023 will abate as we move in 2024. There are still loss-making programs. A220 goes up in rate, a nice little tick-up in 2024, which will help. So, I would say when you think about cash between 2023 and 2024, yes, there’s cash consumption on the loss-making contracts in 2023, and there will be on 2024. But I would tell you, based on our — what we believe today, it will be less impactful in 2024 than 2023.
And so when you think about cash flow over the next couple of years, obviously, the issues around the quality issue and the strike has moved the cash flow generation a bit to the right. And therefore, we won’t be able to generate significant cash flow in 2024 and 2025. There will be some cash that we’re able to generate, which we’ll use to pay down debt as best we can as we move through that. And so really, that’s the game plan. I think more burn on the forward loss this year, a little bit less next year. And as we move into 2024 and 2025, and we move the cash flow positive, we will use that cash flow to pay down debt, and that’s part of — that’s overall when we think about our overall financing strategy and liquidity strategy on how we’re addressing our debt and our cash balances.
Tom Gentile: Yes. And Cai, what I would say about that is we will use the excess cash in 2024 and 2025 to start to pay down debt. But we have a big chunk that’s due in April of 2025. We are not going to be able to generate enough cash to pay all of that off. So, we are going to start to look at some refinancing options, and we’ll consider all different types of options, as Mark said in his comments, as we look to refinance that 2025 debt.
Cai von Rumohr: Very helpful. You mentioned price hikes. One of the messages from Paris was that pretty much everyone is asking for and most people are getting price hikes. Do your forecast and your comments assume any price hikes?
Tom Gentile: No, they do not. Not at this time.
Cai von Rumohr: Thank you.
Tom Gentile: Thanks Cai.
Operator: Our next question comes from Kristine Liwag of Morgan Stanley. Kristine, the line is yours.
Kristine Liwag: Thanks guys. So, in terms of follow-up to question earlier, I mean aerospace is still largely duopoly and therefore, both Boeing and Airbus are important customers. But you’ve got programs like the 787 and the A350 that have been negative free cash flow for over a decade now, and you’ve got additional pressures for the A220 and even defense. With costs continue to increase with labor and supply chain still kind of fragile in some spots, I mean, more pain seems to be unsustainable. At what point do you go back to the customer, I mean despite their importance and renegotiate pricing? And if they’re not willing to negotiate, like what’s your walkaway point of returning some of these programs back to your customers?
