Boeing slumps to a loss as 737-Max costs hit $19bn
Boeing has swung to its first annual loss since 1997 on mounting 737-Max costs and indicated it would again cut production of its bigger 787 Dreamliner aircraft — currently its main source of cash.
Costs related to the global grounding of Boeing’s once fast-selling 737-Max reached $14.6bn (€13.2bn) in 2019 and the planemaker warned of another $4bn in charges in 2020 due to the expense of freezing and slowly restarting the jets’ production.
Boeing, facing the biggest crisis in its history, had previously estimated an around $8bn price tag for the Max fallout.
The aircraft was grounded in March after two crashes that killed 346 people. Boeing has since frozen production of the aircraft as deliveries, the moment when the planemaker receives most of its cash, remain halted.
“We recognise we have a lot of work to do,” Boeing president and CEO David Calhoun said. His predecessor, Dennis Muilenburg, was ousted last year.
Boeing shares rose by as much as 3% as some analysts had expected an even larger charge for 737-Max costs. The stock has lost about a quarter of its value since early March 2019.
“Boeing faces some considerable challenges in the near-term, but we expect the market to focus on the level of free cash flow that the company can generate in the early-2020s on a sustainable basis, once the Max returns to service,” Redburn analyst Jeremy Bragg said.
The Chicago-based planemaker has been updating the 737-Max flight control system and software to address issues believed to have played a role in both crashes.
The US Federal Aviation Administration has suggested it could approve the Max to fly again before mid-year, longer than Boeing had initially expected.
Mr Calhoun said he believes the company can meet the certification timeline.
Boeing’s core operating loss was $2.53bn, compared with a profit of $3.87bn a year earlier. Adding to Boeing’s pain, demand for its bigger and more profitable jet — the 787 Dreamliner — has waned in the face of the US-China trade war, prompting the company to cut production, hurting cash flow at a time when its debt is mounting.
Boeing, which is producing the 787 Dreamliner at 14 aircraft per month, said in October it expects to lower the production in late 2020 to 12 per month, amid a drought of orders from China. The company now expects to further lower 787 Dreamliner production to 10 per month in early 2021.
