Boeing sinks to $3 bn loss on Max groundings
Sales fall 35 per cent as aircraft maker remains unable to deliver blockbuster jet
Photograph: Paulo Whitaker/Reuters
Boeing posted its largest-ever quarterly loss on Wednesday, diving nearly $3 billion (€2.69 billion) into the red as it wrestles with a longer-than-expected grounding of its best-selling 737 Max.
The world’s largest planemaker also reported a fresh delay on its 777X widebody program as engine problems pushed the first flight into 2020 and it warned of possible further delays.
Chief executive Dennis Muilenburg said on a conference call after reporting quarterly results that the company could consider further 737 production cuts as the Max crisis drags on.
Investors largely shrugged off the large loss, which the company flagged last week, but sent shares lower after Mr Muilenburg’s comments on production, to trade about 2 per cent lower.
Chicago-based Boeing has been unable to deliver any 737 Max aircraft since the single-aisle plane was grounded worldwide in March after two fatal crashes in Indonesia Ethiopia and Indonesia killed 346 people in a span of five months.
The total cost so far of the 737 MAX crisis now exceeds $8 billion after Boeing disclosed a $4.9 billion charge last week that includes compensation the planemaker will have to pay airlines for the delayed deliveries.
The second-quarter loss was Boeing’s biggest ever, according to company records.
Boeing has embarked on a campaign to restore faith in its most popular jet and has pledged to remove any risk by reprogramming the software pinpointed as a common factor in both crashes as it faces pressure to convince Max operators and global regulators that the aircraft is safe to fly again.
“This is a defining moment for Boeing,” Mr Muilenburg told analysts, adding that the company has held weekly technical calls and a number of conferences with Max operators around the world and nearly 225 sessions in flight simulators testing its software.
Mr Muilenburg said the company would consider further 737 output cuts below the current rate of 42 aircraft per month, or potentially suspending production if warranted.
Boeing reduced the number of single-aisle aircraft it produces monthly in the Seattle area from 52 to 42 after the second crash in Ethiopia while suspending deliveries of the aircraft to airlines, cutting off a key source of cash and hitting margins.
The lower rate means Boeing has to pay more for parts, which are priced according to the volume Boeing buys. Boeing said it was working toward building 57 of the 737s a month in 2020, and that airplanes produced during the grounding and included within inventory will be delivered over several quarters following return to service.
Boeing said free cash flow fell to a negative $1.01 billion in the quarter, the first full quarter of operations since the Max was banned commercially, though that was narrower than the negative $2.09 billion analysts had expected.
Boeing chief financial officer Greg Smith told analysts the 737 Max compensation to airlines could hurt cash flow in 2019 and beyond, and said Boeing will continue to “diligently review all levers available” to minimize the financial impact.
Sales slipped 35 per cent to $15.75 billion and also came in below the average estimate of $18.55 billion.
Global airlines have had to cancel thousands of flights and use spare aircraft to cover routes that were previously flown with the fuel-efficient Max, eating into their profitability. – Reuters