Boeing Takes $1.4 Billion Hit After MAX Crisis
Boeing Co on Wednesday abandoned its 2019 financial outlook, halted share buybacks and said it lowered production due to the grounding of its fastest-selling 737 MAX jet.
The world’s largest planemaker is facing one of the biggest crises in its 103-year history following the disasters on Lion Air in Indonesia on October 29 and another on Ethiopian Airlines on March 10, which together killed all 346 on board.
Chicago-based Boeing is now reckoning with a blow to its reputation and the financial cost of getting the planes back in the air.
It met sharply lowered Wall Street profit estimates for the first quarter, largely due to stopping deliveries of the money-spinning 737 MAX jets and a slowdown in production.
The production dip alone has cost it US$1 billion (AUD$1.4 billion) so far, the company said, because the lower rate means the planemaker has to pay more for parts, which are priced according to the volume Boeing buys.
Boeing also booked unspecified charges related to developing a software fix for an anti-stall system that Boeing has acknowledged played a role in both crashes, 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.
He did not give a timeline for when the MAX would fly again commercially, saying the timing “will continue to be paced” by global regulators and airlines.
He defended the company’s aircraft development process but indicated he was open to improvements.
“If there’s something that we can do to make airplane development programs or the certification process better and safer, we will pursue it,” Muilenburg said.
Reuters reported on Tuesday that Boeing told some 737 MAX owners it was targeting FAA approval of its software as early as the third week of May, and the ending of the grounding around mid-July, when it could resume building 52 aircraft per month.