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| Boeing reported its first annual loss in more than two decades as the lengthy grounding of the 737 MAX weighed on revenues and added to costs (AFP Photo/ Jason Redmond) |
New York (AFP) - Boeing reported its first annual loss in more than two decades Wednesday as the lengthy grounding of the 737 MAX undercut the company's revenues and exploded costs.
The
aerospace giant reported a $1.0 billion loss in the fourth-quarter and a loss
of $636 million for all of 2019, the company's first year in the red since
1997.
Newly-installed
Chief Executive David Calhoun, who took the reins this month to stabilize the
situation, pledged to turn the company around even as Boeing disclosed $9.2
billion in additional costs connected to the MAX, essentially doubling the bill
from the disaster.
Some
analysts had expected new costs twice as high, and despite the hefty charges,
Boeing shares advanced Wednesday.
The MAX has
been grounded since March following two crashes that killed 346 people that
opened the doors to intense scrutiny of Boeing's safety practices, as well
bruising congressional investigations which have revealed a troublesome culture
at the aviation giant.
"We
are committed to transparency and excellence in everything we do," Calhoun
said in a statement. "Safety will underwrite every decision, every action
and every step we take as we move forward."
Calhoun has
been at the helm of Boeing only since January 13 after Dennis Muilenburg was
ousted in December following criticism of his handling of the crisis, and
immediately after a damning series of internal communications were released.
Calhoun is
targeting mid-2020 to win approval from aviation regulators to resume flights
on the MAX, which is seen as a realistic timeframe after Muilenburg repeatedly
pushed a more optimistic schedule.
Calhoun
told CNBC that he was "confident as a CEO can be" of the current
timetable, adding that "we put together a schedule we think we can
make."
Higher
costs
The
grounding of the MAX dented Boeing's earnings in multiple ways, among the most
damaging of which was a halt in deliveries of new planes to customers, a major
source of revenue.
Boeing
revenues in the fourth quarter plunged 36.8 percent to $17.9 billion, while
revenues for all of 2019 dropped 24.3 percent to $76.6 billion.
The crisis
also prompted the manufacturer to first reduce and then halt production of the
MAX.
Boeing said
Wednesday the changes in the production schedule added $2.6 billion in costs
connected to airplane deliveries, plus another $4 billion in "abnormal
production costs," which are primarily in 2020 and associated with the
suspension of the MAX plus a "gradual resumption" of production.
Chief
Financial Officer Greg Smith said MAX production will be at "low
rates" in 2020, with increases "over the next few years."
The company
set aside $2.6 billion to compensate airlines that have been forced to cancel
thousands of flights due to grounded MAX planes and undelivered aircraft.
With these
costs and expenses disclosed previously, the total impact on Boeing is $18.6
billion.
Ripple
effects
The MAX
crisis has also weighed on numerous suppliers, such as Spirit AeroSystems,
which announced earlier this month that it would lay off 2,800 employees in
Kansas due to the production stoppage.
And General
Electric, which builds engines for the MAX, said the crisis lowered cash flow
by $1.4 billion for 2019.
Boeing also
announced Wednesday that it would again cut back production of the 787
Dreamliner, a top-selling plane that has supported revenues during the
protracted 737 MAX grounding.
The
aerospace giant plans to trim production to 10 airplanes a month in early 2021
through 2023 based on the "near-term market outlook," Boeing said.
The company
in October had dropped production to 12 a month from 14 due to lower orders
from China.
A note from
JPMorgan Chase said Boeing's charges on the MAX were "less than
feared," although the company was expending cash at a faster rate than
expected. Boeing has reportedly lined up $12 billion in loans, but
"balance sheet management" in 2020 will be an area for questions, the
note said.
In another
non-MAX development, Boeing set aside $410 million to cover costs of an
additional uncrewed mission after the December NASA flight did not reach the
International Space Station.
"NASA
is evaluating the data received during the December 2019 mission to determine
if another uncrewed mission is required," Boeing said.
Boeing
shares rose 2.2 percent to $323.66 in early-afternoon trading.
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