Boeing suspends its 2019 outlook

Larry Hoffman
April 27, 2019

Chicago-based Boeing is now reckoning with a blow to its reputation and the financial cost of getting the planes back in the air.

For the first quarter, Boeing's commercial airplanes deliveries tumbled 19 percent yoy to 149, dragging its operating margin down 1 percentage point to 9.9 percent yoy, reflecting "lower 737 deliveries" and "increased costs associated with the recent 737 production rate adjustment". Regulators grounded the plane worldwide following the second crash, a move that also forced the company to halt new deliveries of its most-ordered plane, denting revenues.

The company said it is making progress in devising a software fix for the automatic safety feature on the 737 Max.

Boeing said it has been working on a software update to fix an error in the anti-stall flight control system in the 737 MAX, known as the Maneuvering Characteristics Augmentation System (MCAS).

Muilenburg made the statement in response to a question by Bank of America Merril Lynch analyst Ron Epstein during the company's first quarter 2019 earnings call on Wednesday.

Boeing Co. Chairman, President and CEO Dennis Muilenburg, attends a dinner meeting with President Donald Trump and other business leaders, Tuesday, Aug. 7, 2018, at Trump National Golf Club in Bedminster, N.J. "We think there's evidence that [Boeing] has started to move more in that direction, but the market and the flying public will inevitably need much more".

With the results announced, the company's shares rose 1.2 per cent to $378.36 in the half session of Wall Street. They are still down about 10 per cent since the Ethiopian Airlines crash, wiping nearly US$25 billion off the company's market value.

The fatal accident happened just five months after another 737 MAX 8, operated by Lion Air, crashed in Indonesia, killing 189 passengers and crew members on October 29, 2018.

"But there was no surprise or gap or unknown here or something that somehow slipped through a certification process - quite the opposite", he said.

"We know exactly how the airplane was designed. We know exactly how it was certified", he said. "And that's work ahead of us and we take that very seriously".

Orders are lagging, too, with its backlog down by a significant chunk of what it was last quarter.

Boeing executives held off on providing updated financial guidance until the impact of the 737 MAX issue becomes clearer. Boeing said that losses from the 737 Max were partially offset by higher defense and services revenue. Sales fell 2 percent to $22.9 billion.

Through Wednesday, the stock has rallied over 16 percent year to date.

Boeing posted an adjusted profit of $3.16 per share on revenue of $22.92 billion.

In its latest set of results, Boeing said that due to the uncertainty over when the plane would be allowed to fly again, it could not forecast profits for this year. That matched analysts' average estimate.

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