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.


Oil prices surge after attacks hit Saudi output

Updated 16 September 2019

Oil prices surge after attacks hit Saudi output

  • The Houthi attacks hit two Aramco sites and effectively shut down six percent of the global oil supply
  • President Donald Trump said Sunday the US was ‘locked and loaded’ to respond to the attacks

HONG KONG: Oil prices saw a record surge Monday after attacks on two Saudi facilities slashed output in the world’s top producer by half, fueling fresh geopolitical fears as Donald Trump blamed Iran and raised the possibility of a military strike on the country.
Brent futures surged $12 in the first few minutes of business — the most in dollar terms since they were launched in 1988 and representing a jump of nearly 20 percent — while WTI jumped more than $8, or 15 percent.
Both contracts pared the gains but were both still more than 10 percent up.
The attack by Tehran-backed Houthi militia in neighboring Yemen, where a Saudi-led coalition is bogged down in a five-year war, hit two sites owned by state-run giant Aramco and effectively shut down six percent of the global oil supply.
Trump said Sunday the US was “locked and loaded” to respond to the attack, while Secretary of State Mike Pompeo said: “The United States will work with our partners and allies to ensure that energy markets remain well supplied and Iran is held accountable for its aggression.”
Tehran denies the accusations but the news revived fears of a conflict in the tinderbox Middle East after a series of attacks on oil tankers earlier this year that were also blamed on Iran.
“Tensions in the Middle East are rising quickly, meaning this story will continue to reverberate this week even after the knee-jerk panic in oil markets this morning,” said Jeffrey Halley, senior market analyst at OANDA.
Trump authorized the release of US supplies from its Strategic Petroleum Reserve, while Aramco said more than half of the five million barrels of production lost will be restored by tomorrow.
But the strikes raise concerns about the security of supplies from the world’s biggest producer.
Oil prices had dropped last week after news that Trump had fired his anti-Iran hawkish national security adviser John Bolton, which was seen as paving the way for an easing of tensions in the region.
“One thing we can say with confidence is that if part of the reason for last week’s fall in oil and improvement in geopolitical risk sentiment was the news of John Bolton’s sacking ... and thoughts this was a precursor to some form of rapprochement between Trump and Iran, then it is no longer valid,” said Ray Attrill at National Australia Bank.