Boeing profit slumps 53% as MAX crisis deepens

Reuters Finance 3 weeks ago

(Reuters) - Boeing Co (BA.N) cut production of its flagship Dreamliner and delayed the arrival of a successor to its 777 mini-jumbo, piling new pressures on a rejigged senior management team on Wednesday as the continued safety grounding of its 737 MAX sliced third quarter profits.

The world’s largest planemaker also said it was delaying plans to step up production on its money-spinning 737 line in the Seattle area, and would not hit a record-level 57 aircraft monthly until late 2020, months later than previously planned.

Despite the trio of industrial setbacks, Boeing shares were up 2.6% in morning trading as its steady estimate of a 737 MAX return in the fourth quarter appeared to be eclipsing the downside of the 787 production cut and other problems, an analyst said.

“The 787 cut appears to be mostly tied to China trade negotiations, which at least have the potential to improve over the next 12-months,” said Seaport Global analyst Josh Sullivan.

The profit slump and fresh setbacks capped a tumultuous week for the world’s largest planemaker, already in the eighth month of a deepening crisis over the grounding of its best-selling single-aisle following deadly crashes.

On Tuesday, the company ousted the top executive of its crucial commercial airplanes division, Kevin McAllister, in an unexpected management shakeup related to the MAX crisis that senior industry sources say puts Chief Executive Dennis Muilenburg squarely in the firing line in the event of further revelations or if the company fails to recover from the MAX crisis.

Muilenburg’s title of board chairman was stripped earlier this month.

Muilenburg told analysts on a conference call that Boeing may consider cutting or halting 737 production if return-to-service assumptions change.

Muilenburg also expressed regret over instant messages, first published by Reuters on Friday, in which a former Boeing pilot describes erratic simulator behavior of software now linked to both crashes. The 2016 messages were sent months before the aircraft entered service.

Boeing has begun taking steps to increase safety oversight in its industrial operations and at the board level, he added.

Its timeline of a fourth quarter MAX return compares to a January target from European regulators, while major U.S. carriers United, Southwest, and American were all scheduling without the MAX until next year.

Boeing also said there was “no significant change” to estimated payments to airline customers related to the 737 MAX grounding, part of the $8 billion price tag Boeing has estimated for the MAX crisis.

On Wednesday, the U.S. manufacturer reported a 53% drop in quarterly profit and had a negative free cash flow of $2.89 billion in the quarter, compared with a positive free cash flow of $4.10 billion a year earlier.

Core operating earnings fell to $895 million or $1.45 per share, from $1.89 billion or $3.58 per share, a year earlier.

NEW SETBACKS

Investors on a conference call later on Wednesday will be eager for details on Boeing’s new leadership and efforts to repair its image with the flying public and airline customers. Analysts will also seek clarity on a potential new mid-market airplane whose development has been eclipsed by the MAX crisis, and the industrial setbacks that broaden pressure on the company’s new commercial leadership.

Boeing named veteran executive Stan Deal, who had been running its two-year-old Global Services Division, to the top job at commercial airplanes. Deal’s challenge to get the MAX back into service globally while simultaneously handling new aircraft deliveries and boosting 737 production is seen as one of the most formidable logistical challenges in the industry’s history.

After the 737 MAX safety ban in March, Boeing cut 737 monthly production from 52 aircraft to 42 and halted deliveries, cutting off a key source of cash and hitting margins.

It told suppliers in late July it planned to increase production from 42 to 47 single-aisle aircraft per month in October, return to the pre-crash rate of 52 aircraft per month in February 2020, and hit a record stride of 57 single-aisle jets per month in June 2020, industry sources said.

That schedule - now delayed by months - was contingent on winning regulatory approval early in the fourth quarter.

Its forthcoming 777X twin-aisle, facing engine issues at General Electric (GE.N), was progressing through pre-flight testing and remains on track for first flight in early 2020, but the company was now targeting early 2021 for the first delivery of the 777X.

With the 777-8 and 777-9, Boeing aims to maintain its grip on the ‘mini-jumbo’ market by leapfrogging rival Airbus’ (AIR.PA) 365-seat A350-1000 and scooping up fresh orders following the demise of the A380 superjumbo.

Citing global trade tensions, America’s largest exporter was also reducing the 787 Dreamliner production rate to 12 airplanes per month for approximately two years beginning in late 2020.

Boeing faced additional uncertainty over future production rates for its Dreamliner earlier this month from lost business theoretically putting a hole in production after Boeing increased its build-rate to 14 aircraft per month from 12 at twin U.S. factories.

Tags: Business

Source link
Read also:
One America News Network › Finance › 3 weeks ago
(Reuters) - Boeing Co reported a 53% drop in quarterly profit on Wednesday, as the world's largest planemaker was hurt by the grounding of its best-selling 737 MAX jets.
New York Post › Finance › 3 weeks ago
Boeing cut production of its flagship Dreamliner and delayed the arrival of a successor to its 777 mini-jumbo on Wednesday, piling new pressures on a rejigged senior management team as the continued safety grounding of its 737 MAX sliced third-quarter...
The New York Times › Finance › 3 weeks ago
Boeing Co cut production of its flagship Dreamliner and delayed the arrival of a successor to its 777 mini-jumbo on Wednesday, piling new pressures on a rejigged senior management team as the continued safety grounding of its 737 MAX sliced third...
The New York Times › Finance › 0 month ago
Boeing Co may have to book billions of dollars in additional charges, two brokerages said on Monday, following latest developments around the planemaker's grounded 737 MAX jet that calls into question the timing of the aircraft's return to service.
Reuters › Finance › 0 month ago
Boeing Co may have to book billions of dollars in additional charges related to its parked 737 MAX jets, brokerages said on Monday, citing fresh uncertainty over the time frame for lifting a safety ban imposed after deadly crashes.
The Sydney Morning Herald › Finance › 3 weeks ago
Boeing's latest dismal financial results underscore how swiftly the worldwide grounding of the 737 Max has choked off the company's No. 1 line of business - and how urgently Boeing needs the jet back in the air.
Reuters › Finance › 1 month ago
United Airlines on Tuesday topped Wall Street estimates for quarterly profit, boosted by higher fares and lower fuel costs, and lifted its 2019 profit target despite the continued grounding of the Boeing 737 MAX.
Chicago Tribune › Finance › 1 week ago
Chicago-based Boeing said Tuesday that an aircraft-leasing company replaced an order for 15 Max jets with an order of five 787s. Another customer dropped an order for three Max planes after ordering a larger Boeing 777 earlier this year.
The Wall Street Journal › Finance › 0 month ago
Kevin McAllister is leaving Boeing as head of the commercial airplanes unit at Boeing Co., the biggest company casualty of the crisis surrounding its 737 MAX airliner, a person familiar with the matter said Tuesday.
Business Insider › Automobile › 2 weeks ago
Boeing reached out to a US congressman on the morning of CEO Dennis Muilenburg's House testimony on the 737 Max, asking him to avoid asking questions about another troubled Boeing aircraft. According to an email sent by a Boeing government affairs...
Sign In

Sign in to follow sources and tags you love, and get personalized stories.

Continue with Google
OR