Brian West
Executive Vice President and Chief Financial Officer at Boeing
Great. Thanks, Dave, and good morning, everyone. Well, we [Phonetic] certainly had a few challenges to navigate: the war in Ukraine, the updated regulatory requirements on our commercial airplane programs, as well as the combination of COVID and supply chain constraints, inflation, impacting, in particular, the fixed price Defense development programs, as Dave mentioned. Importantly though, cash performance is on track with our expectations. The utilization in the quarter was in line with what I shared a few months ago. The trajectory throughout the rest of the year remains intact and we continue to expect to generate positive free cash flow for the year. The business is resilient and we're encouraged by the momentum we're seeing.
We still think about this year in three parts. First, we anticipate reaching key delivery milestones. On the 787, we're on a path to restart deliveries in the near term. On the 737, we continue to work towards resuming MAX deliveries to Chinese customers, at the same time, we're re-sequencing our Skyline to take advantage of strong cost of demand for the MAX airplane, and to meet delivery objectives. Next, once we see progress on these programs, we anticipate improvement in our performance metrics, including deliveries, revenue, margin, and cash flow. And finally, as we move through the remainder of the year, our financial performance will accelerate, and going forward, there is assumed [Phonetic] opportunity for our company to return to sustainable growth.
This fall, we plan to host an Investor Day to share our more detailed expectations for the rest of the year and beyond. Before I get into the financials, I did want to make a few points on the current business environment on Slide 3. I'll start with one of the stronger segments, Freighters. The market remains quite robust with cargo traffic up 12% above 2019 levels, in February, largely driven by e-commerce. It continues to be one of the more reliable forms of transportation and our lineup is perfectly positioned to take advantage of this growth for a very long time. The commercial [Indecipherable] remarket recovery expectations are largely unchanged from what I shared last quarter, even as we saw some events that added near-term pressure, including reduced passenger traffic in and around Russia.
Global flight ops are at about 75% of 2019 levels as the global recovery is tempered by China and the impacts of the war in Ukraine. We still see overall passenger traffic returning to 2019 levels in the 2023 to 2024 timeframe. Domestic traffic continues to lead at 78% of 2019 levels in February, with China the notable exception. Ex-China the domestic traffic was 84% of the 2019 levels. US carriers are providing the best window into the recovery at this point. Our customers are seeing record booking volumes and very strong forward yields for late spring and summer to the point of being able to offset sharply higher fuel prices, and are also highlighting the return of business travel.
Beyond domestic routes, we're seeing encouraging signs from intra-regional traffic in both Europe and the Americas. International traffic continues to lag at 40% of the pre-pandemic levels, but we are seeing recovery in regional markets such as intra-Europe and US, Mexico, both progressing well with significant reopening now underway across many parts of Asia. Long-haul recovery will be led by the Trans-Atlantic market this summer as well as Middle East connectors.
Time and again, the market has shown its resilience, driven by the essential nature of moving both people and goods around the world. And in addition to Commercial Airplanes, the expanding market recovery directly benefits our Commercial Services business. In Defense and Space, we continue to see stable demand. The President's FY'23 budget request reflects the important role our products and services have in ensuring our national security, including significantly increased funding for the F-15EX [Phonetic], and support for our other critical products and services that support national security.
Outside of the US, we're seeing similar solid demand as governments prioritize security, defense technology, and global cooperation, given evolving threats. Our operations are well-positioned to maintain continuity despite the war in Ukraine and we see limited impacts to our business. I'll cover the financial impacts a bit later.
On the supply side, we are carefully managing supply-chain constraints and working through issues as they arise to ensure the stability of our production system. We've experienced some disruption to our production, such as some supplier delays, the resource availability, including the impacts of COVID, and we're actively working mitigation plans to ensure continuity. The markets we see -- we serve continue to be big. Our competitive position is strong and we're actively addressing the supply chain. And all of this gives us confidence in the fundamentals of our business and the long-term outlook as we work hard to serve our customers.
With that, let's turn to the financials on Slide 4. First quarter revenue of $14 billion was down 8% and the core operating loss in the quarter was negative $1.5 billion, resulting in a $2.75 core loss per share. Operating cash flow was a usage of $3.2 billion in line with what we expected. These results were impacted by $1.3 billion of charges at BDS, which I will discuss in more detail in a minute. Due to the war in Ukraine and associated impacts to our business, we did record about $200 million in pre-tax charges in the quarter related to certain asset impairments. And we also reduced the backlog by 86 units and roughly $5 billion. As we review business unit financials, I'll highlight some unique challenges that we're overcoming as we drive stability and position for the future.
Let's move to commercial airplanes on Slide 5. First-quarter revenue was $4.2 billion, down slightly. It's primarily driven by the timing of wide-body deliveries, partially offset by higher 737 deliveries. Operating losses of $0.9 billion and the resulting negative margin rate reflects abnormal costs and period expenses, including charges for impacts of the war in Ukraine and higher R&D expense as we increase our investment in the business. During the 787 program, as Dave mentioned, we met a very important milestone and submitted the Cert Plan to the FAA. Deliveries remain paused and we had 115 airplanes in inventory at the end of the quarter. Importantly, we've completed the rework on the initial Airplanes and are preparing them for delivery, including conducting our own check flights in advance. As always, we will work closely with the FAA on remaining steps and we'll follow their lead on timing of deliveries.
As we stated last quarter, we're producing at very low rates and we'll continue to do so until deliveries resume, gradually returning to five airplanes per month over time. Notably, we're currently rolling out conforming airplanes from the factory. We did not take additional charges on the 787 program in the quarter. We did record $312 million of abnormal costs in line with expectations and we still anticipate a total of approximately $2 billion of abnormal, with most being incurred by the end of 2023. Consistent with what we shared last quarter, cash margins on the 787 remain positive and are expected to improve significantly over time. We see a long runway ahead for the 787 program based on a very healthy backlog of 405 airplanes and compelling operating economics for our customers, and we're well-positioned to capture future demand as the wide-body market recovers.
Moving on to the 737 program, we delivered 86 737 airplanes in the quarter, including 37 in March, a slight decrease from fourth quarter of last year, despite impacts of COVID, some supply chain delays, and typical seasonality. Given some supply chain disruption and timing of taking airplanes out of storage, deliveries were slightly below our expectations, and we ended the quarter with 320 MAX airplanes in inventory. However, we still anticipate delivering most of these airplanes by the end of 2023. The timing and pace of delivery for Chinese customers and supply chain stability remain key factors to our delivery profile. We continue to make progress ramping our 737 production rate and are essentially at 31 airplanes per month.
As we shared last quarter, 737 abnormal costs are largely behind us. The MAX customer consideration liability also continues to burn down as expected. On our development programs, we're doing everything we can to complete the certification of the MAX 7 and MAX 10 and ensure their respective first deliveries this year and next. We're working closely with the FDA on implementation of Aircraft Certification, Safety, and Accountability Act legislation and expect any necessary actions to be defined later this year. As always, we will follow the lead of regulator on the timing of certification.
Moving on to the 777, 777X programs. We remain highly confident in this family of airplanes as Dave outlined. We launched the 777-8 Freighter with an order from Qatar Airlines in January. And as a result, we increased the accounting quantity on the program to 400 airplanes. We continue to perform 777-9 Boeing flight test to retire technical risk with over 2,000 flight hours completed through the end of the first quarter. The airplane is performing well and our customers continue to see the value in the compelling economics and sustainability benefits this Airplane offers. Based on an updated assessment of the time required to meet certification requirements, we now anticipate delivery of the first 777-9 airplane in 2025. Additionally, we are coordinating with the FAA to prioritize resources across our development programs. As we manage the company for cash flow, we're adjusting our 777-9 production rate, including a temporary pause due 2023. This move will minimize inventory, reduce the number of airplanes requiring change incorporation, and avoid capitalizing costs in the balance sheet. Additionally, given the robust market for freighters, we're leveraging this production pause on the 777-9 to add 777 Freighter aircraft in the 2023 to 2026 timeframe. We anticipate that the 777-9 pause will result in approximately $1.5 billion of abnormal costs beginning in the second quarter of this year and continuing until production resumes. We believe this is the best allocation of resources and cash.
Turning overall demand to BCA. During the quarter we booked a 167 gross commercial airplane orders, including 134 orders for the 737 MAX, as of the end of the first quarter, we had nearly 4,200 airplanes in the backlog, valued at $291 billion. Let's now move to Defense, Space and Security on Slide 6. First-quarter revenue was $5.5 billion, down 24% and operating margin was negative 17%. These results were primarily driven by lower volume and $1.3 billion in charges on fixed-price development programs, including the VC-25B and the T-7A.
On a normalized basis, adjusting for one-time items, revenue across our defense portfolio, including government services, was down 9%, half of which was the impact of COVID and supply chain constraints; the other half was from planned program transitions. The VC-25B program recorded a $660 million charge, primarily driven by higher supplier costs, higher cost to finalize technical requirements, and schedule delays. The T-7A Red Hawk program recorded $367 million in charges, primarily driven by ongoing supplier negotiations, impacted by supply chain constraints, COVID, and inflationary pressures.
We continue to have high confidence in the long runway ahead for the T-7A program, similar pressures impacted other fixed-price development programs though to a lesser extent. From a cash perspective, these charges will be incurred over the next several years. We received $5 billion in orders during the quarter, including an award for six MH-47G Block II Chinook rotorcraft for US Army Special Operations and the BDS backlog remains at $60 billion. Across the portfolio, we're focused on improving performance as we transition several development programs into production and we're making progress, but have more work to do as we position ourselves to deliver for our customers. While we recognize charges on these key programs, we remain confident in demand for these future technologies and capabilities, and our Defense and Space portfolio is well-positioned for growth.
Now, let's turn to Global Services results on Slide 7. The Global Services team had a great quarter, particularly on our parts and distribution business due to the strength of the portfolio and broad offerings. First-quarter revenue was $4.3 billion, up 15%, and operating margin was 14.6%, in line with our expectations. Results were driven by higher Commercial Service volume and favorable mix. We received $3 billion in orders during the quarter, including a fuel-saving digital solutions contract for Etihad Airways 787 fleet and a contract for KC-135 horizontal stabilizers from the US Air Force. The big GS backlog remains at $20 billion.
With Commercial Services revenue now back to nearly 90% of pre-pandemic levels, our Services business remains well-positioned for growth as the commercial market recovers and the Defense business continues to see strong support.
Now, let's turn to Slide 8 and cover cash and debt. We ended the first quarter with strong liquidity, comprised of $12.3 billion of cash and marketable securities in the balance sheet, and access to $14.7 billion across our bank credit facilities, which remain undrawn. Our debt balance decreased slightly from the end of last year to $57.7 billion, driven by repayment of maturing debt. Our investment-grade credit rating is a priority and we remain committed to reducing debt levels.
Now, similar to what I shared last quarter, I'd like to review the key drivers of 2022 revenue and cash. In comparison to 2021, we still anticipate total company revenue to increase this year. The growth will be primarily driven by higher commercial airplane deliveries on the 737 and 787 programs and solid growth in our Services business as the commercial market continues to improve. And while the overall demand outlook for the Defense business remains stable, due to the revenue impact of the charges we took in the first quarter, we are forecasting a modest decrease in revenue at BDS this year versus 2021. However, we expect 2023 to return to stable levels. On cash, we still expect to generate positive free cash flow this year. The key driver of improvement remains higher 737 and 787 delivery volume. As we described previously, the working capital benefit from delivering airplanes for inventory we partially offset by a lower advances and progress payments balance, we still anticipate a burndown of our advanced balance this year. The profile continues to be dynamic due to customer discussions and timing of deliveries.
From a phasing standpoint, our first quarter cash utilization was in line with what we shared in January. We remain confident that our free cash flow will improve in the second quarter and we'll make meaningful -- and we'll meaningfully accelerate in the back half of the year as we achieve the key delivery milestones that I outlined. As we look beyond this year, we expect 2023 cash flow will be materially higher than 2022, and we look forward to sharing more details in our plan in the fall. To wrap up, our performance is tied to several key items, commercial market recovery, return to delivery for the 787 and 737 MAX in China, successful execution of -- and certification of development programs, and production system and delivery stability.
We remain acutely focused on what we can control and most notably, we continue to focus our efforts to stabilize our production system, including the supply chain, and improve our delivery predictability. And while we saw improvements in some of these in the first quarter, we have more work to do, and we're keenly aware that these activities will be critical to our access [Phonetic], and are prioritizing these resources accordingly. Beyond these execution priorities immediately in front of us, we continue to invest in our people, technology, manufacturing capabilities, and strategic partnerships to ensure we're well-positioned for future growth, and there is no doubt that the business environment is evolving. That said, we're making good progress, driving productivity and cash flow, while addressing risks as they arise. And while we do all of this, we're laser focused on safety, quality, and stability. We believe these are the right actions and resource calls. And we remain confident in the strength of our business now and in the future.
With that, over to Dave for closing comments.