Boeing anticipates return of Max jets even as it’s hit with industrial setbacks
Boeing Co said on Wednesday it still expects U.S. regulatory approval for its grounded 737 Max in the fourth quarter, sending its shares higher despite a slump in quarterly profit.
The world’s largest plane-maker also said it was cutting production of its flagship Dreamliner, delaying plans to step up output of its money-spinning 737 line, and also delaying the arrival of a successor to its 777 mini-jumbo.
These fresh industrial setbacks heaped pressure on a newly rejigged senior management team fighting to repair trust with airline customers and passengers shaken by an eight-month safety ban on its 737 Max after two deadly crashes.
Boeing did not take fresh charges on top of the estimated US$8-billion price tag for the Max crisis, but warned of pressure on its cash flow until deliveries and production resume at normal levels.
The plane-maker separately faces a slew of investigations by regulators, U.S. Congress, and the Department of Justice over its development of the 737 Max, its previously best-selling workhorse for short-haul travel.
Boeing ’s steady estimate of a 737 Max return in the fourth quarter appeared to eclipse the downside of the 787 production cut due to a drought of orders from China amid trade tensions, 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.
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 is set to testify before U.S. lawmakers over two days in Washington next week.
On a conference call with analysts, he expressed regret over instant messages, first published by Reuters on Friday, in which a former Boeing pilot describes erratic simulator behaviour of software now linked to both crashes.
The 2016 messages, sent months before the aircraft entered service, plunged Boeing into a media firestorm as the FAA and lawmakers demanded explanations on their content and delayed release.
Boeing’s timeline of a fourth-quarter Max return compares to a January target from European regulators.
Muilenburg said the company was making “daily” progress on testing the final software fix for the 737 Max and developing related training materials, though the FAA said on Tuesday it would need at least several more weeks for review.
Muilenburg said the company could consider cutting or halting 737 production if regulatory approvals are further delayed, though there was no immediate announcement of job cuts.
On Wednesday, the U.S. manufacturer reported a 53-per-cent drop in quarterly profit and a negative free cash flow of US$2.89 billion in the quarter, compared with a positive free cash flow of US$4.10 billion a year earlier.
Core operating earnings fell to US$895 million or US$1.45 per share, from US$1.89 billion or US$3.58 per share, a year earlier.
The Max crisis, which has consumed the company, has eclipsed work on a potential new mid-market airplane code-named NMA, and other industrial setbacks broadened pressure on the company’s new commercial leadership.