Brian West
Chief Financial Officer Executive Vice President, Finance at Boeing
Great. Thanks, Dave, and good morning, everyone. Let's go to the next page and cover the total company results.
First quarter revenue was $17.9 billion. That's up 28% year-over-year primarily driven by higher volume in both commercial and defense. Core operating margin was minus 2.5%, and the core loss per share was $1.27, both big improvements versus last year due to higher commercial volume and improved operating performance. Margins and EPS were negative, driven by expected abnormal costs and period expenses as well as a charge on the KC-46 Tanker program that I noted last month.
Free cash flow was a usage of $786 million in the quarter, significantly better versus last year driven by the higher commercial deliveries as well as an advanced payment tied to Lot 9 on the tanker program, another important award for the KC-46 franchise. As we noted in our last earnings call, cash was lower this quarter than the fourth quarter due to lower wide-body deliveries and expected seasonality.
Turning to the next page, I'll cover commercial airplanes. Let's start with orders. BCA booked 107 net orders in the quarter, including JAL and Lufthansa, and we have a backlog of over 4,500 airplanes valued at $334 billion. Moving to the figures on the left, revenue was $6.7 billion, up 60% year-over-year, driven by 130 airplane deliveries with increases on both the 87 and the 37 programs, partially offset by 87 customer considerations. Operating margin was minus 9.2%, which was significantly better than last year, but margins are impacted by expected abnormal costs and period expenses including higher R&D spending.
Let's take a minute on the 737 program. The 37 had 113 deliveries in the first quarter, up 31% year-over-year, including 53 deliveries in the month of March. Picking up where Dave left off regarding the supplier fuselage item, we found [Phonetic] the issue. We booked a nonmaterial financial impact in the quarter, we understand the rework steps required, and we started repairs on several airplanes. And although near-term deliveries will be impacted, we still expect to deliver between 400 and 450 737s this year. April and 2Q deliveries will be lower, but the first half monthly average will be about 30 airplanes per month in line with what we said previously. The second half deliveries are expected to be around 40 per month with sequential quarterly improvement in the back half. While the high end of the delivery range is pressured, ultimate performance will be dictated by the pace of the fuselage recovery.
Regarding inventory, we ended the quarter with approximately 225 MAX airplanes in inventory, including 138 that were built for customers in China and roughly 30 -7s and -10s. Within these 225 inventoried airplanes, roughly 75% will require the fuselage rework. And the number of inventoried airplanes will likely increase in 2Q, and we still expect most to be delivered by the end of 2024.
On production, we're completing airplanes in final assembly and expect to recover in the coming months, paced by fuselage availability. We're supporting Spirit through this recovery, including manufacturing and engineering resources as well as a cash advance. To support overall supply chain stability, we're not changing the master schedule, including anticipated production rate increases, and we've contemplated any near-term parts inventory builds into our forward look. Within final assembly, as Dave mentioned, we expect to increase our rate to 38 per month later this year and 50 per month in the '25-'26 time frame.
Moving on to the 787 program. We had 11 deliveries in the first quarter and still expect 70 to 80 deliveries this year. We're producing at 3 per month and still plan to reach 5 per month by year-end. We ended the quarter with 95 airplanes in inventory, most of which will be delivered by the end of 2024. We booked $379 million [Phonetic] of abnormal costs in the quarter, in line with expectations, and there's no change to the total estimate of $2.8 billion. We still expect abnormal to be largely done by the end of this year.
Finally, on the 777X program, efforts are ongoing. Both the program time line and the abnormal estimate of $1.5 billion are unchanged. We booked $126 million of abnormal costs in the quarter, in line with expectations.
With that, let's turn to the next page and go through defense and space. BDS booked $10 billion in orders during the quarter, including awards for the U.S. Air Force for 15 KC-46 Tankers and an E-7 development contract as well as 184 Apaches for the U.S. Army. The BDS backlog is $58 billion. Moving to the figures on the left, revenue was $6.5 billion, up 19% year-over-year driven by the KC-46 Tanker award, program milestone completions and underlying volume. We delivered 39 aircraft and three satellites in the quarter and also began production of the MH-139 Grey Wolf. Operating margin was minus 3.2%, significantly higher than last year, but still negative, driven by a $245 million pretax charge on the tanker program, which I noted last month. Let me give you a little bit of context on the overall BDS portfolio. Remember, 15% of the revenues in the quarter are the firm fixed price development contracts. These contracts get a lot of attention, and there is a commitment to derisk these programs as much as we can as we move through the development cycles and into full-scale stable production.
Next and importantly, over 60% of revenues in the quarter collectively delivered double-digit margins. We have many important programs that are performing to historical performance levels. The balance of the 1Q revenue is made up of a small number of established programs that are experiencing negative margins on certain contracts due to specific near-term supply chain and factory stability pressures that we've highlighted previously. It will take time to work through these issues, and we fully expect that these programs will improve through the course of this year and return to normal margin levels over time. The BDS team is fully committed to delivering the development programs to our customers. We've implemented new contracting disciplines, accelerated efforts around lean manufacturing, and we're investing in innovation and in our people, all of which underpin our plans going forward. Overall, the defense portfolio is well positioned. There's strong demand across the customer base. The products are performing in the field, and we're confident that our efforts to drive execution and stability will return this business to performance levels that our investors would recognize.
Turning to the next page, I'll cover Global Services. As Dave mentioned, BGS had another very strong quarter. We received $4 billion in orders during the quarter, and the backlog is $19 billion. Looking to the figures on the left, revenue was $4.7 billion, up 9% year-over-year, primarily driven by our commercial parts and distribution business. Operating margin was 17.9%, an expansion of 330 basis points versus last year with both our commercial and government businesses delivering double-digit margins. Operating margins in the quarter were higher than expected due to favorable mix, and we don't assume that will repeat. In the quarter, BGS announced the first Boeing Converted Freighter line in India, delivered AerCap's 50th 737-800 Boeing Converted Freighter and broke ground on a new component operations facility in Jacksonville, Florida.
Turning to the next page, I'll cover cash and debt. We ended the quarter with $14.8 billion of cash and marketable securities, and our debt balance decreased to $55.4 billion. We paid down $1.7 billion of debt maturities in the quarter and absorbed the expected cash flow usage driven by seasonality. We also had $12 billion of revolving credit facilities at the end of the quarter, all of which remain undrawn. Our liquidity position is very strong. The investment grade credit rating is a priority, and we're deploying capital in line with the priorities we've shared, generate strong cash flow, invest the business and pay down debt.
And flipping to the last page on our outlook. The 2023 financial outlook is unchanged from what we previously shared, including $3 billion to $5 billion of free cash flow generation. Commercial demand remains strong across our key programs and services. Passenger traffic in February increased over 55% year-over-year and is at 85% of pre-pandemic levels comprised [Technical Issues] domestic and 78% international. Defense demand is robust, and the initial FY '24 presidential budget is in line with expectations. As Dave mentioned, our portfolio and capabilities are well positioned to support the needs of the nation and of our allies. On the supply chain front, as you'll recall when we set out our 2023 framework last November, we predicted the supply chain instability would likely continue. The good news is that we plan for it within our financial and delivery guidance. There's progress in many areas of the supply base, but we will likely face pockets of variability through the rest of this year. We continue to make key investments including higher inventory buffers and forward deployment of resources as we take appropriate actions to mitigate impacts and improve predictability.
From a quarterly perspective, we continue to expect financials to improve throughout the year. On 2Q specifically, we expect core EPS will be roughly in line with 1Q '23 performance absent the tanker charge as the 737 delivery impacts would be largely offset by higher wide-body deliveries. We expect free cash flow to be breakeven to slightly negative as we work through the 37 recovery. All things considered, we feel good about what's in front of us. And we remain on track to achieve our long-term guidance including $10 billion of free cash flow in the '25-'26 time frame.
With that, I'll turn it over to Dave for any closing comments.
