Boeing profits plunge 21% in last three months due to 737 Max crisis

April 25, 2019

Boeing profits plunge 21 percent in last three months due to 737 Max crisis – as plane manufacturer estimates it will take a $1 billion hit because of grounded fleet

Boeing profits plunged 21 percent in the first three months of this year as a result of the 737 Max crisis
World’s largest planemaker estimates it will cost $1b to fix the grounded fleet following the Lion Air and Ethiopian Airlines disasters that left 346 dead
Boeing Co on Wednesday abandoned its 2019 financial outlook because of uncertainty surrounding the 737 Max fleet
It said its core earnings fell to $1.99 billion, or $3.16 per share, in the quarter ended March 31 from $2.51 billion, or $3.64 per share, a year earlier

Boeing profits have plunged 21 percent in the first three months of this year as a result of the 737 Max crisis – as the world’s largest planemaker estimates it will take a $1 billion hit because of the grounded fleet.

Boeing Co on Wednesday abandoned its 2019 financial outlook because of uncertainty surrounding the 737 Max fleet, which continues to remain grounded after two deadly crashes.

Excluding certain items, Boeing said its core earnings fell to $1.99 billion, or $3.16 per share, in the quarter ended March 31 from $2.51 billion, or $3.64 per share, a year earlier.

The world’s largest plane manufacturer is facing one of the biggest crises in its 103-year history following the disasters on Lion Air in Indonesia in October and another on Ethiopian Airlines in March, which together killed all 346 on board.

Boeing profits plunged 21 percent in the first three months of this year as a result of the 737 Max crisis. Boeing said its core earnings fell to $1.99 billion, or $3.16 per share, in the quarter ended March 31 from $2.51 billion, or $3.64 per share, a year earlier.

Chicago-based Boeing is now reckoning with a blow to its reputation and the financial cost of getting the planes back in the air.

The $1 billion estimate was disclosed on Wednesday in a presentation for investors as Boeing released first quarter financial results, which missed Wall Street expectations largely due to stopping deliveries of the 737 MAX jets and a slowdown in production.

A spokesman said the estimate covered higher production costs over the next several years.

Boeing also booked unspecified charges related to developing a MAX software fix and pilot training.

Chief Executive Dennis Muilenburg told analysts on a conference call that Boeing has confidence in its software fix and expects a certification flight with the U.S. Federal Aviation Administration in the ‘near term’ after completing more than 135 test and production flights.

‘The timing of return to service for that MAX will continue to be paced by ongoing work with global regulators and our customers,’ Muilenburg said.

Boeing Co on Wednesday abandoned its 2019 financial outlook because of uncertainty surrounding the 737 Max fleet, which continues to remain grounded after two deadly crashes

‘If there’s something that we can do to make airplane development programs or the certification process better and safer, we will pursue it.’

A fuller picture of how Boeing plans to repair its image with the flying public and stem further financial damage will not emerge until the end of the second-quarter as 737 production cuts did not begin until mid-April.

The crashes caused regulators worldwide to ground the 737 MAX and triggered investigations into the aircraft’s development by federal transportation authorities and the U.S. Department of Justice.

Although safety experts have raised some questions over crew performance in both crashes, attention has focused on anti-stall software known as MCAS, which Boeing has acknowledged was a common link in the separate chains of events leading to both crashes.

Muilenburg insisted on Wednesday that ‘there was no surprise or gap or unknown here or something that somehow slipped through the certification process.’

‘We know exactly how the airplane was designed. We know exactly how it was certified,’ he said.

‘We’ve taken the time to understand that. That has led to the software update that we’ve been implementing and testing and we’re very confident that when the fleet comes back up, the MAX will be one of the safest airplanes ever to fly.’

Boeing cut production of the jets following the MAX grounding to 42 aircraft per month, down from 52, and its operating cash flow in the first quarter was around $350 million lower than a year earlier.

Boeing said it would issue a new financial forecast when it has more clarity around the issues surrounding the 737 MAX. In January, it said it expected full-year revenue of $109.5 billion to $111.5 billion and core earnings per share between $19.90 and $20.10.

The company repurchased $2.3 billion of its shares in the latest quarter, all of which occurred prior to mid-March. Boeing bought back $9 billion of its stock last year.

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