The company recorded a loss in operational earnings of $636 million last year, down from a $10.5 billion profit in 2018, with costs arising from the Max grounding spiralling to nearly $19 billion – more than double Boeing’s initial estimate.
Boeing’s commercial aircraft division lost $6.7 billion last year, and the manufacturer has earmarked another $2.6 billion to further compensate airline customers for the ongoing grounding.
Meanwhile, Boeing also recorded a $2.6 billion increase in production costs relating to the Max last year, and expects a further $4 billion hit from “abnormal production costs”.
In total, Boeing estimates the costs associated with the 737 Max situation will run to nearly $19 billion. “[Our] financial results continue to be significantly impacted by the 737 MAX grounding,” said Boeing in a trading update.
New president and chief executive David Calhoun, who replaced Dennis Muilenburg shortly before Christmas, said Boeing recognised it had “a lot of work to do”. “We are focused on returning the 737 Max to service safely and restoring the long-standing trust that the Boeing brand represents with the flying public,” said Calhoun.
“Safety will underwrite every decision, every action and every step we take as we move forward. Fortunately, the strength of our overall Boeing portfolio of businesses provides the financial liquidity to follow a thorough and disciplined recovery process.”
Earlier this month, Boeing pushed back its estimate for the Max returning to service to “mid-2020” on account of ongoing efforts to have certified a software update for the deep-seated flight control system thought to be responsible for two fatal crashes involving the aircraft in just five months, and new pilot training requirements.
Lion Air flight 610 crashed shortly after taking off from Jakarta in October 2018, killing all 189 people onboard. Five months later, Ethiopian Airlines flight 302 came down en route to Nairobi. All 157 people onboard died.
Boeing’s revenues fell 24% in 2019 from $101 billion to $77 billion, while the company posted a core operating loss of $3.4 billion, down from a $10.7 billion profit in 2018.
Commercial aircraft deliveries, meanwhile, more than halved last year from 806 in 2018 to 380 in 2019. Boeing announced in December it would halt production of the 737 Max in the new year. It currently has more than 400 Maxs awaiting delivery, more than double the number that had actually entered service before the aircraft was grounded.
Boeing will also cut production of its highly profitable 787 Dreamliner aircraft from 14 a month to 12 later this year, and then to 10 early next year. It plans to restore monthly production to 12 in 2023.
