Boeing's 737 Max crisis has cost it dearly. Photo / Getty Images
Boeing's 737 Max crisis has cost it dearly. Photo / Getty Images
The cost of the 737 Max crisis at Boeing has doubled to more than US$18 billion (NZ$27b), plunging the US aerospace giant into the red for the first time in over two decades.
Boeing is reeling from the aftermath of two 737 Max airliners crashing within five months of each other and the subsequent grounding of the jet since March.
Boeing slumped to a US$3.4b (NZ$5.3b) loss in its latest annual results, a huge swing from the $10.6b profit it make a year ago. The last time the company made an annual loss was 1997. Revenues were down by a quarter to $101b.
With the 737 Max grounded after Lion Air and Ethiopian Airlines jets crashed with the loss of 346 lives, Boeing has been unable to deliver new planes. This has resulted in multi-billion compensation claims from customers. New orders for the troubled jet have also dried up, and some sales have been pulled.
Boeing's 737 Max crisis has cost it dearly. Photo / Getty Images
It is still not certain when the Max will fly again as the company seeks certification for modifications to the handling system linked to the crashes. Boeing has suggested the Maxs may take to skies again in the summer but has repeatedly missed earlier estimates.
Boeing boss Dave Calhoun batted off questions about whether passengers would be willing to fly on the Max once aviation regulators give it the green light.
"I know pilots like to fly this aircraft as they tell me," he said. "When passengers see their pilot getting on the plane willingly, maybe even happily, they will follow."
Mr Calhoun said the crashes and resulting scrutiny from regulators mean the Max will be "the safest aircraft ever flown". He added that a rebranding was unlikely: "I can't merchandise it, I can't hang banners on it, I can't rename it. I believe airlines still believe in this aircraft."
Dennis Muilenburg was ousted over his handling of the Max crisis - which resulted in the jet being labelled a "flying coffin" by US politicians investigating the crashes, and chairman Mr Calhoun appointed to take over.
His task has been made difficult after Boeing released a series of damning internal emails in which staff said the 737 Max programme was "designed by clowns and supervised by monkeys", and suggested they would prefer their families not to fly on the jet.
The loss was far worse than analysts had been expecting, but Boeing shares nevertheless rose 3pc to $324.
Boeing said it was taking a further hit of $9.2bn relating to compensation and the costs of freezing production of the Max and then slowing restarting it.
Dennis Muilenburg, CEO of Boeing, at the Senate Commerce, Science and Transportation Committee hearing. Photo / Getty Images
In a further blow, Boeing said it was slowing down production of its 787 wide-body airliner - its main cash generator since the grounding of the Max - from 14 aircraft a month to 12 by the end of the year and then down to 10 in 2021.
This is in response to poor sales in South East Asia, the world's fastest-growing aviation market. Boeing hopes to raise production back to 12 a month in 2023.
Airliners - by far the biggest part of Boeing's business - were not the only source of trouble. Boeing also announced fresh charges on its military air-to-air tanker and space programmes.
Reburn analyst Jeremy Bragg described the Max charges as "staggering". He added that while Mr Calhoun was seeking to draw a line under costs relating to the Max, "there is still considerable uncertainty as to when it will return to service, and how quickly Boeing can ramp up production again".
Robert Stallard, an analyst at Vertical Research Partners, described the numbers as a "sea of red ink". He added: "As expected, we get a 'kitchen sink' quarter under the new chief executive."
