Boeing profits hit as costs of grounding 737 Max continue to mount

Third quarter profit falls 51% as production schedule hit by delays

FILE PHOTO: Aerial photos showing Boeing 737 Max airplanes parked at Boeing Field in Seattle, Washington, U.S. October 20, 2019.  Picture taken October 20, 2019.  REUTERS/Gary He/File Photo
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Boeing's third-quarter earnings fell 51 per cent as it added another $900 million (Dh2.30 billion) in costs for the troubled 737 Max and deliveries of new planes tumbled from a year ago.

The company said on Wednesday that it has developed flight-control software and a pilot-training programme for the Max, and it expects a regulatory review of its fixes to begin in the fourth quarter.

Boeing eased concern that it might even temporarily shut down the Max assembly line near Seattle if the plane remains grounded. The company said it will raise 737 production from 42 a month to 57 a month by late next year.

The company's timetable for bringing back the Max after two crashes killed 346 people has repeatedly proved too optimistic. A few weeks ago, chief executive Dennis Muilenburg forecast that the plane would be flying by about October.

Besides the crisis surrounding the 737 Max, which suffered its first crash a year ago this month, Boeing reported setbacks with two larger planes.

Boeing cited uncertainty around global trade in saying it will cut monthly production of the larger 787 jet from 14 a month to 12 for about two years, starting later this year. Last month, Mr Muilenburg warned investors that US trade tension with China – the company's biggest foreign market – threatened sales of wide-body planes such as the 787.

The plane manufacturer said it now aims to begin delivering the newest version of its big 777 airliner in early 2021, later than originally anticipated. Problems with engines made by General Electric have delayed test flights for the 777X.

Boeing's net income fell to $1.17 billion from $2.63bn a year earlier. Earnings per share of $1.45 after excluding nonrecurring items were far short of the $2.04 Wall Street was looking for, according to a poll by Zacks Investment Research.

Revenue was $19.98bn, which was better than analysts expected but 21 per cent lower than the same quarter in 2018. Deliveries of commercial planes plunged to 62 in the third quarter, from 190 a year ago as the worldwide grounding of the Max reached seven months.

Without cash coming in from deliveries of the 737, Boeing is hemorrhaging cash –free cash flow was negative $2.9bn, from $4.1bn a year ago and the company has taken on $5.5bn in new debt.

On Tuesday, Boeing announced it was replacing the executive in charge of the commercial aircraft business, Kevin McAllister. The company did not give a reason for the move, but Mr McAllister's division has been rocked by the ongoing grounding of the Max, unexpected structural cracks in dozens of older 737s, a failed safety test for the 777X which is in development, and tepid sales of the 787 Dreamliner.

Canaccord Genuity analyst Ken Herbert said thwhile the Max gets all the attention, investors have grown increasingly worried about the other Boeing planes and other issues.

Mr McAllister is the first high-level job casualty of the Max crisis, although earlier this month the company board stripped Mr Muilenburg of his other role as chairman.

Company executives were scheduled to speak with industry analysts on Wednesday to discuss what lies ahead for Boeing.