MAX Grounding Hits Profits for Boeing

Industry |

The continued grounding of Boeing's 737 MAX has hit profits and the company has also announced that Dreamliner production is to be cut and the new replacement for the 777 mini-jumbo delayed. Additionally, in Seattle, delays in up-scaling production of the 737 lines had also been slowed.

Despite all these setbacks shares in Boeing still rose by around 2% during pre-market trading. This represents confidence that the 737 MAX will return to flight soon.

It has been a difficult week for Boeing. As the largest airplane maker in the world, the company has not escaped the financial impacts over the grounding of its best selling line following a series of crashes.

Safety of the 737 MAX is the top priority for the company who claims to be making steady progress and are on track to return the plane to service in the fourth quarter of this year. 

Safety operation and oversight have been overhauled across the company at multiple levels, including the board where senior executives have already been reshuffled, ousted and replaced.

Still Off the Schedule

While the company claims MAX will return in the fourth quarter European regulators are not expecting the plane back in service before January, with the major US carriers continuing to schedule without it until at least next year.

This week Boeing announced an enormous 53% drop in profit this quarter and a negative cash flow of around $2.89billion. This compares to a positive cash flow of $4.1Billion in the same period last year. Shares have also fallen from $3.58 in 2018 to $1.45.

More Setbacks for Boeing

Investors are eagerly awaiting word from the new leadership as to how it intends to repair the company’s image and alleviate the concerns of its customers. They are also seeking news on progress with the new airplane which has been set back by the grounding of the 737 MAX.

Stan Deal, a veteran executive, has been moved by Boeing from Global Services to get MAX back in service as quickly as possible. After the ban production of the 373 was cut from 52 to 42 aircraft/month and deliveries were halted.

In July Boeing announced that it would increase production by 5 aircraft monthly, with normal production being resumed by February 2020. This schedule has now been delayed because of a lack of regulatory approval.

Boeing’s new 777X has also been delayed. General Electric has had engine issues but the plane has been progressing through testing and it is anticipated that it will take its first flight in 2020 with the first deliveries occurring in 2021.

787 Dreamliner production has been dropped to 12 planes/month from 2020. Its US factories have been hit by the loss in production leaving them facing an uncertain future.