This article is from the source 'nytimes' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.nytimes.com/2019/07/24/business/boeing-earnings-737-max.html

The article has changed 4 times. There is an RSS feed of changes available.

Version 0 Version 1
Boeing Reports $3.4 Billion Loss for Second Quarter as 737 Max Costs Rise Boeing Says It May Halt 737 Max Production
(about 5 hours later)
Boeing reported a $3.4 billion quarterly loss on Wednesday as costs related to its grounded 737 Max continued to rise. Boeing said on Wednesday it could shut down production of the 737 Max if the grounding of its most popular plane persists much longer.
The company said it recorded $15.8 billion in sales in the quarter, down 35 percent from the same time a year earlier, in large part because it has stopped delivering the Max. On a conference call discussing the company’s second-quarter earnings, Boeing’s chief executive, Dennis Muilenburg, and the chief financial officer, Greg Smith, raised the prospect of halting production of the 737 Max, which has been grounded by regulators since March after two crashes.
Shutting down 737 Max production would have profound consequences for Boeing as well as its customers and suppliers around the world. Airlines have ordered thousands of the planes.
Boeing already slowed production of the Max to 42 planes per month in April. It is stockpiling those planes, and won’t be able to deliver any Max jets until regulators clear the plane to fly.
“If Boeing has to halt production, which we do not expect but which is a possibility, it would have a big ripple effect on suppliers throughout the supply chain,” said Jim Corridore, an analyst at CFRA Research.
Boeing has said it expected the Max to return to service late this year. But Boeing and regulators keep finding new problems with the model, leading to a cascading series of delays.
“If that timeline changes significantly, we will have to evaluate these other scenarios,” Mr. Muilenburg said. “There’s no one specific trigger.”
As it determines whether to further reduce the Max production rate or halt it entirely, Boeing is considering the date the Max is likely to return to service, as well as its ability to store and maintain the hundreds of completed planes it has not yet delivered, Mr. Smith said. “No one item is going to drive the schedule,” he said.
Mr. Muilenburg added that temporarily halting Max production might make more sense than reducing production levels to fewer than the current 42 planes per month, for reasons having to do with suppliers, staffing and training.
Boeing reported a $2.9 billion net loss for the most recent quarter on Wednesday as costs related to its grounded 737 Max continue to rise. The company’s stock was down more than 2 percent in midday trading.
Boeing said it recorded $15.8 billion in sales in the quarter, down 35 percent from the same time a year earlier, in large part because it has stopped delivering the Max.
Boeing also said it had taken orders for $474 billion worth of goods and services, including more than 5,500 commercial airplanes.Boeing also said it had taken orders for $474 billion worth of goods and services, including more than 5,500 commercial airplanes.
The figures reflected Boeing’s surprise announcement last week that it was taking a $5.6 billion charge related to the cost of compensating airlines that fly the Max, and that it was anticipating a further $1.7 billion in costs related to production slowdowns. The figures reflected Boeing’s surprise announcement last week that it was taking a $5.6 billion charge related to the cost of compensating airlines that fly the Max, and that it was anticipating a further $1.7 billion in costs linked to production slowdowns.
The company’s Max jetliners have been grounded worldwide since March, after two deadly crashes in five months. The economic fallout from the continued grounding of the Max is already being felt more broadly.
The announcement last week was the clearest indication to date of just how much the crashes and subsequent grounding will cost the company. Boeing had already announced an expected $1 billion in costs related to production delays, and a $100 million fund for families and communities affected by those killed in the crashes. Airlines have canceled thousands of flights, losing billions of dollars. Companies that make parts for the Max are suffering as Boeing has slowed production. And American durable goods orders and the export of commercial aircraft are down, contributing to a small but detectable dent to the American economy.
“This is a defining moment for Boeing and we remain focused on our enduring values of safety, quality, and integrity in all that we do, as we work to safely return the 737 MAX to service,” Boeing’s chief executive, Dennis Muilenburg, said in a statement. “During these challenging times, teams across our enterprise continue to perform at a high level while delivering on commitments and capturing new opportunities driven by strong, long-term fundamentals.” The three United States airlines that fly the Max — Southwest Airlines, American Airlines and United Airlines — have canceled thousands of flights into November, depressing their revenues.
The impact of the groundings is extending well beyond Boeing. The three United States airlines that fly the Max — Southwest Airlines, American Airlines and United Airlines — have canceled flights into November, and may not fly the plane again this year. They have canceled thousands of flights, depressing their revenues. General Electric, which makes the Max engines through a partnership with Safran, is also expected to record a dip in revenues as a result of the grounding when it reports earnings next week.
Boeing — the nation’s largest manufacturing exporter — has halted deliveries of the Max, even as it continues to produce the planes at a reduced rate. As a result, it has planes worth more than $30 billion awaiting delivery. That is contributing to a dip in recent months in American durable goods orders and in the export of commercial aircraft. And last month the Census Bureau said that orders of durable goods, which include commercial airplanes, were down 1.3 percent in May. It was the third time in four months that orders had dropped.
General Electric, which makes the Max engines through a partnership with Safran, is also expected to record a dip in revenues this quarter as a result of the grounding. In a recent report, the chief United States economist for JPMorgan Chase, Michael Feroli, said the effects of the Max grounding could shave about one-tenth of a percentage point of gross domestic product in the quarter.
The Max was grounded after the crash of Ethiopian Airlines Flight 302 in March, which killed all 157 people aboard. In October, Lion Air Flight 610 crashed just minutes after taking off, killing 189. In both accidents, a new automated system malfunctioned, pushing the planes into unrecoverable nose dives. “The issues affecting Boeing’s 737 Max could begin impacting the economic dataflow,” he said.
Boeing has developed a software update for the plane, and is working with the Federal Aviation Administration and other global regulators to get the Max flying again. But Boeing and regulators keep finding new problems with the Max, leading to a cascading series of delays. Boeing’s announcement last week was the clearest indication to date of just how much the crashes and grounding will cost the company. The company had already announced an expected $1 billion in costs from production delays, and a $100 million fund for families and communities affected by those killed in the crashes.
Last week, Boeing said it was anticipating that the Max would be cleared to fly again in the United States and some other markets by the start of the last quarter of 2019. But in practice, it could be next year before the planes are flying again. “This is a defining moment for Boeing and we remain focused on our enduring values of safety, quality, and integrity in all that we do, as we work to safely return the 737 MAX to service,” Mr. Muilenburg said in a statement. “During these challenging times, teams across our enterprise continue to perform at a high level while delivering on commitments and capturing new opportunities driven by strong, long-term fundamentals.”
The Max was grounded after the crash of Ethiopian Airlines Flight 302 in March, which killed all 157 people aboard. In October, Lion Air Flight 610 crashed just minutes after taking off, killing 189. In both accidents, a new automated system malfunctioned, pushing the planes into nose dives.
Boeing has developed a software update for the plane, and is working with the Federal Aviation Administration and other global regulators to get the Max flying again.
“Boeing is a $100 billion revenue company who just saw a 35 percent decline in revenues, so there will be some impact on the economy,” Mr. Corridore said. “But even at its size, we don’t think Boeing’s troubles are likely to significantly hurt overall U.S. GDP.”