737 MAX woes send Boeing to first annual loss since 1997
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Boeing’s troubled 737 MAX dominated the conversation as the aerospace giant delivered its earnings update Wednesday, remaining the most high-profile fault line for America’s largest manufacturer.
Boeing executives acknowledged during a call with investors that the ongoing 737 MAX grounding has been a drag on the company’s profits and culture.
“It’s a very challenging moment for Boeing,” CEO David Calhoun said Wednesday during his first earnings call since assuming role earlier this month. “We recognize that many of our stakeholders are rightly disappointed in us.”
Boeing’s ledger dipped into the red for the first time in more than two decades as the company recorded its first full-year loss ($636 million) since 1997. The MAX issues continued to weigh down Boeing’s results, with the manufacturer saying it expected costs related to the MAX to exceed $18 billion.
The 737 MAX is the best-selling jet in the world, but it has been grounded globally since March 2019 following the second of two crashes that together killed 346 people.
Boeing’s whole 737 program has about 4,400 aircraft on back order according to Greg Smith, the company’s CFO. He said with such a substantial backlog, he’s confident in the long-term viability of the aircraft.
“Although the MAX grounding has presented us with near-term challenges, the depth and breadth of our backlog affords us the time to assess and mitigate longer-term implications,” he said.
But, Boeing executives emphasized, their current focus is on getting the 737 MAX fleet back into the air safely, and in full cooperation with global regulators.
The company expects it will take a year or more for the approximately 400 MAX jets that have already been produced to be delivered to airlines. Production of the MAX — which was halted earlier this month — is likely to resume as Boeing gears up to start delivering the MAXes now sitting in storage. Ultimately the manufacturer plans to produce about 57 MAXes each month.
Calhoun, the CEO, also expressed confidence in the plane’s outlook.
“The MAX is a sound airplane,” he said. “I believe we’ll deliver the safest airplane in the sky.”
The CEO also addressed negative internal communications between employees that became public last year. He insisted that they were not representative of the company as a whole, and assured investors that under his leadership, Boeing will do more to address employee concerns more proactively.
Calhoun added that, although the 737 MAX remains Boeing’s top priority, he is bullish about the upcoming introduction of the 777X, which took its first test flight this past weekend. It now will undergo a a series of test flights needed for Boeing to win regulatory approval for the jet to begin flying commercial flights.
“Flying this 777X tested more technology, tested our patience, tested our disciplines in every way you can think of, and we did it successfully,” he said. “We will move it through a certification process that will be more rigorous than history has ever seen.”
The first 777-9 deliveries are expected in 2021.
Featured photo by Zach Wichter/The Points Guy.
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