Boeing posts record annual loss, delays 777X with demand hobbled
US$6.5B charge adds to list of headaches
Boeing Co. took a us$6.5 billion charge on its new 777X jet and posted a record annual loss on Wednesday, as the cost of tighter regulation in the wake of two 737 MAX crashes caught up with its next development.
The huge charge, on top of an industry-wide recession resulting from the coronavirus pandemic, caps a tumultuous year for the world’s largest aerospace company which saw it slash production, shed thousands of jobs and battle to restore its reputation.
Boeing said it now expects the 777X, a larger version of the 777, to enter service by late 2023, a year later than its previous estimate, with a longer and costlier certification process after scrutiny over the 737 MAX.
Boeing is making “prudent design modifications” to the 777X, including hardware changes to control electronics, Boeing chief executive dave Calhoun said. “2020 was a historically challenging year for our world,” he said.
Boeing shares closed down 3.97 per cent at us$194.03 in New york.
Calhoun said Boeing has sufficient liquidity to manage the downturn but sounded a note of caution on the smoothness of vaccine distribution and an early summer rebound in air travel.
The historic slump in air travel and expanded inspections over production defects has halted deliveries of some 80 787s to airlines so far, cutting off a key source of cash and raising the prospect of a reach-forward loss as Boeing works to clear an inventory of about 450 737 MAX jets.
Boeing said it expects to resume handing over 787s to customers later this quarter, with none in January and few in February, though analysts say deliveries are not expected to recover to 2019 levels until at least 2024.
The company reaffirmed plans to hit a sharply-reduced production rate of 5 787s per month in March, when it will consolidate production at its South Carolina factory, a decision first reported by reuters.
Boeing, which has delivered some 40 737 MAXS from its stored inventory, is also sticking with plans to reach a production rate of 31 737 jets per month by the beginning of 2022, though at least one analyst expects that to slip to early 2023.
The European union Aviation Safety Agency (EASA) lifted its own 22-month 737 MAX flight ban on Wednesday, as did Britain’s Civil Aviation Authority (CAA), following a move by u.s. counterparts in November and Brazil and Canada afterward.
China, which was first to ban the plane after the second crash in March 2019 and which represents a quarter of MAX sales, has not said when it will act.
Even so, Boeing said on Wednesday it expects to win remaining 737 MAX regulatory approvals in the first half of 2021.
demand from China has also been curbed by years of trade tensions between Washington and Beijing, though industry sources have expressed cautious hope for a revived deal now u.s. President Joe Biden has taken office, following a pattern of government-brokered Chinese jet orders coinciding with transfers of power or diplomatic resets.
Calhoun earlier told CNBC he was “optimistic” about new big plane orders from China, although industry sources have cautioned that demand remains thin despite Chinese traffic rebounding more quickly than elsewhere.
Boeing unveiled us$8.3 billion in operating charges on Wednesday, including a us$468 million charge for abnormal 737 production costs, us$275 million over KC-46 aerial refuelling tanker production issues, and us$744 million linked to its 737 MAX settlement with the u.s. department of Justice over a fraud conspiracy charge.
The company’s net loss rose to us$8.44 billion in the fourth quarter ended dec. 31, from us$1.01 billion a year earlier, taking its full-year loss to a record us$11.94 billion. revenue fell 15 per cent to us$15.30 billion in the quarter.