Boeing reports $2.9bn loss in Q2, biggest quarterly loss ever

Boeing announced on July 18, 2019 that second-quarter earnings would be dented by $4.9 billion in one-time costs to compensate airlines for disruptions due to the grounding of the 737 MAX aircraft. (AFP/File Photo)
Updated 24 July 2019

Boeing reports $2.9bn loss in Q2, biggest quarterly loss ever

  • Revenues tumbled 35.1 percent to $15.8 billion
  • The 737 MAX has been grounded since mid-March following the March 10 Ethiopian Airlines crash

NEW YORK: Boeing reported a second-quarter loss of $2.9 billion Wednesday as the grounding of 737 MAX following two deadly crashes continues to weigh on the company.
The loss, the biggest ever in a single quarter for the aerospace giant, follows last week’s announcement that Boeing would set aside $4.9 billion after taxes to compensate airlines for canceled flights and the delay in plane deliveries.
Revenues tumbled 35.1 percent to $15.8 billion, reflecting the hit from a halt to deliveries of the 737 MAX, a top-selling plane.
“This is a defining moment for Boeing and we remain focused on our enduring values of safety, quality, and integrity in all that we do as we work to safely return the 737 MAX to service,” said chief executive Dennis Muilenburg.
The 737 MAX has been grounded since mid-March following the March 10 Ethiopian Airlines crash, the second of two crashes that together claimed 346 lives.
Boeing is developing a software fix to address a problem with a flight handling system that was linked to both crashes.
Airlines have repeatedly pushed back their target dates for returning the jets to service as the regulatory timeframe has dragged on, most recently when the Federal Aviation Administration in June identified problems with microprocessor during simulator testing.
“Disciplined development and testing is underway and we will submit the final software package to the FAA once we have satisfied all of their certification requirements,” Boeing said.
Boeing has said it is targeting early in the fourth quarter to win approval from regulators.
The company, which has pulled its full-year profit forecast due to uncertainty about the MAX, boosted dividend payments in the second quarter. Compared with last year, Boeing spent $1.2 billion in dividends, up 20 percent from the year-ago period.
Boeing shares have lost more than 13 percent since the Ethiopian crash, a time period that has seen the broader S&P 500 gain more than nine percent.
But Boeing shares rallied following last week’s announcement about the $4.9 billion charge and an additional $1.7 billion in costs due to lower production levels of the 737 MAX.
Although the costs were higher than expected, analysts said investors were relieved that Boeing did not further cut production levels of the MAX and that the company still forecasts a return to service for the plane later this year.
The company is expected to be pushed for more details on its interactions with global regulators and customers during a conference call later Wednesday morning.
Boeing will also likely be probed on whether the 737 MAX crisis is diverting attention from other key programs, such as the development of a new middle-range aircraft sought by airlines.
Boeing on Wednesday pushed back the timeframe for first flights of the 777X, a new long-haul plane under development. It pointed to problems with the 777X engine, which is being built by General Electric.
The company said it is still targeting late 2020 for first delivery of the planes but said “there is significant risk to this schedule given engine challenges, which are delaying first flight until early 2020.”
Shares fell 0.9 percent to $369.42 in pre-market trading.

OECD forecast sees global growth at decade low

Updated 22 November 2019

OECD forecast sees global growth at decade low

  • Governments failing to get to grips with challenges, outlook says

PARIS: The global economy is growing at the slowest pace since the financial crisis as governments leave it to central banks to revive investment, the OECD said on Thursday in an update of its forecasts.

The world economy is projected to grow by a decade-low 2.9 percent this year and next, the Organization for Economic Cooperation and Development said in its Economic Outlook, trimming its 2020 forecast from an estimate of 3 percent in September.

Offering meagre consolation, the Paris-based policy forum forecast growth would edge up to 3 percent in 2021, but only if a myriad of risks ranging from trade wars to an unexpectedly sharp Chinese slowdown is contained.

A bigger concern, however, is that governments are failing to get to grips with global challenges such as climate change, the digitalization of their economies and the crumbling of the multilateral order that emerged after the fall of Communism.

“It would be a policy mistake to consider these shifts as temporary factors that can be addressed with monetary or fiscal policy: they are structural,” OECD chief economist Laurence Boone wrote in the report.

Without clear policy direction on these issues, “uncertainty will continue to loom high, damaging growth prospects,” she added.

Among the major economies, US growth was forecast at 2.3 percent this year, trimmed from 2.4 percent in September as the fiscal impulse from a 2017 tax cut waned and amid weakness among US trading partners.

With the world’s biggest economy seen growing 2 percent in 2020 and 2021, the OECD said further interest rate cuts would be warranted only if growth turned weaker.

China, which is not an OECD member but is tracked by it, was forecast to grow marginally faster in 2019 than had been expected in September, with growth of 6.2 percent rather than 6.1 percent.

However, the OECD said that China would keep losing momentum, with growth of 5.7 percent expected in 2020 and 5.5 percent in 2021 in the face of trade tensions and a gradual rebalancing of activity away from exports to the domestic economy.

In the euro area, growth was seen at 1.2 percent in 2019 and 1.1 percent in 2020, up both years by 0.1 percentage point on the September forecast. It is seen at 1.2 percent in 2021.

The OECD warned that the relaunch of bond buying at the European Central Bank would have a limited impact if euro area countries did not boost investment.

The outlook for Britain improved marginally from September as the prospect of a no-deal exit from the EU recedes.

British growth was upgraded to 1.2 percent this year from 1 percent previously and was seen at 1 percent in 2020.