Boeing abandons 2019 outlook after 737 MAX aircraft groundings

Boeing grounded its bestselling 737 MAX aircraft after being involved in two fatal accidents. (Getty Images/AFP)
Updated 25 April 2019
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Boeing abandons 2019 outlook after 737 MAX aircraft groundings

  • Boeing’s core earnings fell to $1.99 billion, or $3.16 per share
  • The planemaker said it faced $1 billion in increased costs in the first-quarter ended March 31

Boeing missed sharply-lowered Wall Street estimates for revenue and cashflow in the first quarter and suspended its 2019 outlook, as the world’s largest planemaker continued to suffer from the grounding of its 737 MAX jets.

The company said it faced $1 billion in increased costs in the first-quarter ended March 31, related to the 737 aircraft as it halted deliveries of the grounded planes to customers around the globe.

The company also said it was halting share buybacks.

The fallout of a second deadly crash within months in March has seen Boeing cut production of the jets to 42 aircraft per month, down from 52, and its operating cash flow in the first quarter was around $350 million lower than a year earlier.

Boeing is also spending on developing a fix for an anti-stall software known by the acronym MCAS, which has been a common link in the separate chains of events leading to the two crashes within a span of five months.

The company said it would be issuing a new forecast in the future when it has more clarity around the issues surrounding the 737 MAX.

First-quarter operating cash flow declined to $2.79 billion, from $3.14 billion, missing the Wall Street’s average estimate of $2.82 billion.

Revenue fell 2 percent to $22.92 billion, below analysts’ average estimate of $22.98 billion.

Excluding certain items, Boeing said its core earnings fell to $3.16 per share, in the quarter from $3.64 per share, a year earlier. Analysts had expected Boeing to earn $3.16 per share.


Regulators fail to set date for Boeing 737 MAX return to service

Updated 45 min 29 sec ago
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Regulators fail to set date for Boeing 737 MAX return to service

  • ‘The only timetable is to make sure the aircraft is safe to fly’
  • Boeing had held off submitting a proposed software fix for review after the US Federal Aviation Administration raised additional questions

FORT WORTH, United States: Civil aviation regulators from around the world failed to make a determination Thursday on when Boeing’s popular 737 MAX aircraft can return to the skies after being grounded following two deadly crashes.
“The only timetable is to make sure the aircraft is safe to fly,” Daniel Elwell, acting head of the US Federal Aviation Administration, said at the conclusion of the day-long meeting in Texas.
There was “enthusiastic agreement to continue the dialogue,” he said, but acknowledged that “each country has to make its own decision.”
“If they unground relatively close to when we unground I think it would help with public confidence,” Elwell said, while adding that: “We can’t be driven by some arbitrary timeline.”
Until the 737 MAX crashes in Ethiopia in March and Indonesia in October which left a combined 346 people dead, common practice was that air regulators would follow the assessment of the agency overseeing the model, in this case the FAA.
On Wednesday, Elwell threw cold water on hopes of a speedy resolution, after revealing Boeing had held off submitting a proposed software fix for review after his agency raised additional questions.
“Once we have addressed the information requests from the FAA, we will be ready to schedule a certification test flight and submit final certification documentation,” Boeing said in a statement.
Investigators have focused on the MAX’s anti-stall Maneuvering Characteristics Augmentation System in inquiries into the two deadly crashes.
Boeing last week said the MCAS update was ready for the certification process, and US airlines were hoping the planes could be back in the skies in time for part of the summer travel season.
But Elwell on Thursday said the process could take one month, two months or longer.
“It is all determined by what we find in our analysis of the application,” he said on CNBC.
Once Boeing has submitted all documentation, the FAA will conduct a test flight and detailed analysis to evaluate the safety of the software.
Richard Aboulafia, an aviation analyst at Teal Group, said Boeing wants to avoid having to repeat the process.
“There’s a lot at stake in terms of the first impression by the world’s regulators,” he told AFP.
US air carriers that operate the 737 MAX, including American Airlines, Southwest and United, have said they hope to have the planes flying again by mid-August at the latest.
The FAA’s reputation has taken a beating since the March crash, and faced accusations of an overly cozy relationship with the aviation giant. Other aviation authorities now appear less likely to follow the US agency.
Michel Merluzeau of Air Insight Research, said American officials could end the 737 MAX’s grounding toward the end of summer, with authorities in other countries following suit “several months” later.
“We’re headed for a return to service that could drag on in time,” he said.
Elwell said regulators also have yet to decide on changes to pilot training once the adjustments have been approved.
The United States has differed with a number of countries on this issue, including Canada. Washington believes training on computers or tablets is sufficient for seasoned pilots but Ottawa wants to require training on flight simulators.
Transport Canada said it had “full confidence” in the FAA and its processes, but did not rule out the possibility that pilots of 737 MAX jets would be required to receive simulator training.
Nicholas Robinson, director-general of civil aviation, told Canadian media the training was a “possible option” but added it was too early to say if it would be mandatory.
The European Aviation Safety Agency, Canada and Brazil are among countries saying they will conduct their own evaluations of the MCAS fix.
What China, the first country to ground the 737 MAX, will do is also an unknown given the flare-up in trade frictions with the United States.
About five dozen representatives from 33 countries accepted the FAA’s invitation to attend the regulators’ conference in Texas.
Elwell said the closed-door meeting involved “frank questions and a frank discussion,” adding that his counterparts wanted “clarifications” on US procedures.
Regaining public trust will take time, according to opinion polls conducted by Southwest showing that many passengers are not yet ready to get back aboard a 737 MAX jet.
And pilots also have qualms.
“Before the Boeing MAX’s return to service, we need answers and transparency,” the European Cockpit Association said Thursday in a statement.
The organization, which represents 38,000 pilots from 36 countries, said it was “deeply disturbing” that the FAA and Boeing were considering a return to service while not disclosing “the many challenging questions prompted by the MAX design philosophy.”
Beyond Boeing’s reputation, the 737 MAX crisis comes at a major financial cost, given that the plane represented 80 percent of the company’s order backlog as of the end of last month.
The company, which has suspended deliveries, is only paid at the moment of delivery and will have to indemnify air carriers for losses.