Boeing’s first annual loss in 20 years dragged down by 737 Max crisis

Boeing reported its first annual loss since 1997, Boeing said on Wednesday, as costs rose as a result of the 737 Max crisis and signaled another cut in production of the 787 Dreamliner. The Boeing 737 Max has been banned from flying around the world since two crashes that killed 346 people. Boeing has spent nearly a year trying to fix hardware and software problems and re-certify the 737 Max, but the process has been repeatedly delayed by problems with testing and repair.

Boeing's first annual loss in 20 years dragged down by 737 Max crisis

Boeing’s 737 Max will cost $14.6 billion worldwide in 2019, and the aircraft manufacturer has warned of an additional $4 billion in costs by 2020 due to the need to freeze and slowly restart production.

Boeing faces its biggest crisis in history, with the biggest loss previously estimated at about $8 billion.

“We realize that we have a lot of work to do,” David Calhoun, Boeing’s president and chief executive, said in a statement. His predecessor, Dennis Muilenburg, was ousted last year.

“Boeing has faced some considerable challenges in the near term, but we expect the market to be focused on the free cash flow that the company will generate sustainably in the early 2020s once the 737 Max resumes service,” said Jeremy Bragg, an analyst at Redburn. ”

The aircraft manufacturer has been updating the Boeing 737 Max’s flight control system and software to address issues allegedly involved in both crashes.

The Federal Aviation Administration (FAA) said it may approve the 737 Max re-launch plan by the middle of the year, longer than Boeing initially expected. Calhoun said the plane’s re-entry process would be expected to follow the schedule.

Boeing reported full-year 2019 sales of $76.559 billion, down 24 percent from 2018 and a loss of more than $600 million. Among them, the full-year sales revenue of civil airliners was $32.255 billion, down 44% from 2018.

In the fourth quarter of 2019, Boeing reported revenue of $17.911 billion, down 37% from a year earlier, a net loss of $1.010 billion, a net loss of $3.424 billion a year earlier, and delivered nine 737 series aircraft, compared with 173 a year earlier, down 94.80% from a year earlier.

On a U.S. basis of General Accounting Standards (GAAP), Boeing lost $1.79 per share in the fourth quarter of 2019, compared with $5.93 per share a year earlier, while core loss per share (non-GAAP) was $2.33, or $5.48 per share a year earlier.

To add insult to injury for Boeing, demand for boeing’s larger, more profitable 787 Dreamliner has fallen under pressure from the U.S. market. This has led the company to cut production and impact cash flow at a time of rising debt.

Boeing reported negative free cash flow of $2.67 billion for the fourth quarter ended December 31, compared with a positive $2.45 billion a year earlier.

Boeing currently produces 14 787 Dreamliners a month. The company said in October it expected production to fall to 12 a month by the end of 2020, as orders from China fell. The company now expects the monthly production of Dreamliners to fall further to 10 by early 2021.

Boeing spent $18 billion in the fourth quarter of 2019, almost double the cost of the third quarter, thanks to the 737 Max’s no-fly ban. This fee includes $2.6 billion in pre-tax compensation for the loss of 737 Max from Boeing’s customer company.

American Airlines has canceled flights of the 737 Max aircraft up to the beginning of June and says it will take at least 30 days for fafa y.m. to get approval to prepare their planes and train pilots.

Boeing shares rose 3 percent at the start of trading Wednesday after some analysts had expected the 737 Max to cost more and the re-launch process expected to follow the schedule. The company’s share price has fallen by about a quarter since early March 2019.