Boeing posts first annual loss since 1997
NEWYORK: Boeing reported its first annual loss in more than two decades on Wednesday as the lengthy grounding of the 737 MAX undercut the company’s revenues and exploded costs.
The aerospace giant reported a $1 billion loss in the fourth-quarter and a loss of $636 million for all of 2019, the company’s first year in the red since 1997.
Newly-installed chief executive David Calhoun, who took the reins this month to stabilise the situation, pledged to turn the company around even as Boeing disclosed $9.2 billion in new costs connected to the MAX.
Some analysts had expected new costs twice as high, and despite the hefty charges, Boeing shares rallied early on Wednesday.
The MAX has been grounded since March following two crashes that killed 346 people which opened the doors to intense scrutiny of Boeing’s safety practices.
“We are committed to transparency and excellence in everything we do,” Calhoun said in a statement. “Safety will underwrite every decision, every action and every step we take as we move forward.”
Calhoun has been at the helm of Boeing only since January 13 after Dennis Muilenburg was ousted in December following criticism of his handling of the crisis, and immediately after a damning series of internal communications were released.
Calhoun is targeting mid-2020 to win approval from aviation regulators to resume flights on the MAX, which is seen as a realistic timeframe after Muilenburg repeatedly pushed a more optimistic schedule.
The grounding of the MAX dented Boeing’s earnings in multiple ways, halting deliveries of new planes to customers, a major source of revenue.
Boeing’s revenue in Q4 plunged 36.8% to $17.9 billion, while revenue for all of 2019 dropped 24.3% to $76.6 billion.
Boeing said changes in the production schedule added $2.6 billion in costs connected to airplane deliveries, plus another $4 billion in “abnormal production costs” primarily in 2020 associated with the suspension of the MAX and a “gradual resumption” of production. The company set aside $2.6 billion to compensate airlines that have been forced to cancel thousands of flights due to grounded MAX planes and undelivered aircraft. With these costs and expenses disclosed previously, the total impact on Boeing is $18.6 billion.