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BA Boeing Co

192.91
0.96 (0.50%)
29 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type
Boeing Co NYSE:BA NYSE Common Stock
  Price Change % Change Share Price High Price Low Price Open Price Shares Traded Last Trade
  0.96 0.50% 192.91 193.38 191.20 192.00 4,465,114 00:00:00

Boeing Forecasts Initial $1 Billion Hit From 737 MAX Troubles--3rd Update

24/04/2019 2:48pm

Dow Jones News


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By Doug Cameron 

Boeing Co. said it would take an initial hit of more than $1 billion on the global grounding of the 737 MAX and suspended full-year financial guidance, providing a first look at the financial damage from two fatal crashes of its best-selling plane.

The initial charge includes $1 billion to cover Boeing's estimate for higher plane-production expenses spread over the life of the MAX program, as well as unspecified costs to fix flight-control software implicated in the accidents and additional pilot training as part of efforts to return the aircraft to service.

The grounding of the MAX, securing regulatory approval for a software fix and winning back the confidence of customers and flyers have become the biggest challenge to Boeing since regulators grounded the global 787 Dreamliner fleet in 2013 following a spate of onboard battery fires that led to no injuries.

The two 737 MAX crashes killed all 346 people on board.

Boeing's shares rose 1.4% in pre-open trade on Wednesday, reversing an earlier decline as it reported first-quarter earnings of $2.15 billion. The profit demonstrated the resilience of Boeing's broader portfolio, with sales of 787s and other jetliners as well as services and military hardware limiting the drop in free cash flow.

However, the company said it would suspend the huge share buybacks that have propelled its share price over the past three years and dropped full-year profit and sales guidance for 2019. Investors have cut some $27 billion off Boeing's market value since the Ethiopian Airlines crash, valuing the company at $212 billion.

Boeing's initial estimate of for tackling the MAX crisis compares with analysts estimates running as high as $3 billion, including payouts to families of passengers killed in the twin crashes as well as airlines and suppliers.

The suspension of buybacks in mid-March and shelving of 2019 financial guidance marks a sharp reversal from the optimism displayed by Boeing executives in January when they set plans to deliver more than 900 jetliners this year alongside higher sales and profits.

It has amassed more than 5,000 orders for the single-aisle MAX and planned to boost monthly production by five planes to 57 this summer, which analysts expected to account for more than 40% of annual sales and profits.

Instead, it has cut output to 42 a month, leaving planes to pile up around its Seattle-area assembly plants as the global grounding left it unable to deliver new planes. Boeing didn't book any commercial orders for a 737 in March, the first month without such a sale in almost seven years.

The lower output means Boeing will likely cede its title as the world's biggest plane maker to European rival Airbus SE at the end of this year.

Regulators have grounded the 737 MAX world-wide until regulators sign off on a software fix that Boeing is preparing for the system that investigators believe contributed to both crashes.

More than 370 MAX planes had already been delivered, forcing carriers including Southwest Airlines Co. -- which reports quarterly earnings on Thursday -- to cancel flights and reconfigure schedules ahead of the busy summer travel season.

Southwest has canceled MAX flights through early August. American Airlines Group Inc. has cancelled MAX flights through Aug. 19.

The company reported profits of $2.15 billion for the quarter compared with $2.48 billion a year earlier, with sales dipping 2% to $22.92 billion.

Write to Doug Cameron at doug.cameron@wsj.com

 

(END) Dow Jones Newswires

April 24, 2019 09:33 ET (13:33 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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