Boeing reports first annual loss in two decades
NEW YORK: Boeing Co reported its first annual loss in more than two decades pm 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 officer David Calhoun, who took the reins this month to stabilize the situation, pledged to turn the company around even as Boeing disclosed $9.2 billion in additional costs connected to the MAX, essentially doubling the bill from the disaster.
The MAX has been grounded since March following two crashes that killed 346 people and opened the doors to intense scrutiny of Boeing’s safety practices, sparking bruising congressional investigations that revealed a troublesome culture at the aviation giant.
“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.”
The grounding of the MAX dented Boeing’s earnings in multiple ways, among the most damaging of which was a halt in deliveries of new planes to customers, a major source of revenue.
Boeing revenues in the fourth quarter plunged 36.8% to $17.9 billion, while revenues for all of 2019 dropped 24.3% to $76.6 billion.
The crisis also prompted the manufacturer to first reduce and then halt production of the MAX.
Boeing said Wednesday the changes in the production schedule added $2.6 billion in costs connected to airplane deliveries, plus another $4 billion in “abnormal production costs,” which are primarily in 2020 and associated with the suspension of the MAX plus a “gradual resumption” of production.
Chief financial officer Greg Smith said MAX production would be at “low rates” in 2020, with increases “over the next few years.”
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.
S&P said after the earnings report that Boeing remained under review for a possible downgrade in its credit rating, saying it would resolve its outlook once it has more information on when Boeing will resume deliveries and production, among other issues.
Boeing also announced on
Wednesday that it would again cut back production of the 787 Dreamliner, a top-selling plane that has supported revenues during the protracted 737 MAX grounding.
The aerospace giant plans to trim production to 10 airplanes a month in early 2021 through 2023 based on the “near-term market outlook.”
The company in October had dropped production to 12 a month from 14 due to lower orders from China.
In another non-MAX development, Boeing set aside $410 million to cover costs of an additional uncrewed mission after the December Nasa flight did not reach the International Space Station.