More red ink from Boeing overnight Wednesday with the jetliner maker reporting its first loss in more than two decades as it doubled the estimated cost of the 737 Max crisis to $US18.6 billion.
The plane maker’s new loss estimate for the embattled jetliner was contained in its December quarter earnings statement. It includes payments to airlines, reduced profits over the plane’s production cycle and expenses tied to halting manufacturing, but importantly not the costs of more than 100 legal actions and other probes.
Boeing revealed a full-year loss of $US636 million on $US76.6 billion in revenue. For the fourth quarter, it recorded $US17.9 billion in revenue and a loss of $US1 billion.
To make matters worse the company revealed demand for its key remaining plane, the 787 had fallen in the quarter, meaning it will be forced to trim production once again.
Boeing had already announced in October plans to lower the production rate for the 787 Dreamliner to 12 per month in late 2020 from 14 and now expects to cut the rate to 10 per month in early 2021, hurting cash flow at a time when its debt and costs are growing.
Costs related to the 737 Max grounding reached $US14.6 billion in 2019 and the planemaker warned of another $US4 billion in charges this year due to the expense of slowly re-starting production.
Boeing had estimated a $9.2 billion price tag for the Max fallout in the third quarter.
But the eventual cost will be much higher – the latest estimate does not include potential settlements or damages from more than 100 lawsuits the company faces from victims’ families in both crashes Lion Air in Indonesia and Air Ethiopia), which together killed 346 people.
Boeing is also the target of a US criminal investigation into matters related to the 737 Max, while US airline regulators are still probing the plane and the way it was approved to fly.
Deliveries of hundreds of 737 Max jets remain frozen while Boeing updates the flight control system and software to address issues involved in the two fatal crashes that triggered the grounding in early 2019.
And to add to the plane maker’s woes, it indicated it would again cut production of its bigger 787 Dreamliner aircraft, currently its main source of cash.
Newish President and CEO David Calhoun said he believes Boeing can win regulatory approval for the planes to fly again by mid-2020.
Boeing had initially targeted 737 MAX approval in late 2019. That optimistic timeline, coupled with criticism that company culture put profits before safety, contributed to former CEO Dennis Muilenburg’s departure.
