Boeing reports its worst-ever financial losses as 737 Max crisis continues

The Boeing 737 Max crisis continues to hit the company. Photo / Getty Images

Software problems that played a role in two deadly plane crashes involving Boeing's new 737 Max commercial jetliners are proving to be financially calamitous for the Chicago-based aerospace giant, which reported its largest-ever quarterly loss Wednesday.

The company lost US$3.38 billion ($5.04 billion) for the quarter on US$15.7 billion revenue, sending its stock down close to three percent by early afternoon.

Boeing faces a reputational crisis with no end in sight, as its once-promising 737 Max commercial jetliner has been grounded for well over four months. Executives said the company may have to temporarily shut down its 737 Max production, which would be an extraordinary step that would have ripple effects throughout the global aerospace industry. The company already slowed the production rate.

"This is a defining moment for Boeing, and we're committed to coming through this challenging time better and stronger as a company," chief executive Dennis Muilenburg said in a call with investors.

The company is working to fix a host of technical problems related to the plane's flight control systems, and executives have tentatively estimated that the planes will be deemed flight-worthy early in the fourth quarter of 2019.

But regulators have provided no firm timeline for when it will allow the planes to fly again, and Boeing executives emphasized that their estimates could slip further depending on regulators' decisions. Airlines are assuming the crisis will continue late into the fall, canceling hundreds of flights every day.

For Boeing, the financial impacts are mounting. Executives said Wednesday that they could not estimate how much the crisis would affect the company's earnings for the year.

Last week the company reported a US$5.6 billion charge needed to compensate 737 Max customers. It faces lawsuits from family members of the 346 people who died in Indonesia and Ethiopia aboard the doomed flights, as well as continued scrutiny from Congress.

The 737 Max is the newest version of Boeing's best-selling commercial jet. It was pitched as an even more reliable version of a long-trusted plane, complete with engine updates that made the plane more fuel-efficient.

However, the company added a new flight-control system called the Maneuvering Characteristics Augmentation System, or MCAS, which was designed to make the plane behave as similarly as possible to past models, with minimal new training for pilots.

It was later discovered that the system could push the nose of the plane downward in certain rare but dangerous situations, and override pilots' manual controls.

These problems played a role in the October 2018 plane crash of a 737 Max 8 that killed 189 people in Indonesia, according to investigation reports and Boeing executives. Then, in early March, another Max 8 crashed under similar circumstances, killing 157 people.

The FAA initially mandated a set of fixes "no later than April," but the timeline slipped as Boeing and the FAA discovered more problems with the plane's flight control software.

Teal Group aerospace analyst Richard Aboulafia said Boeing is doing "a decent job" managing the financial fallout of the Max crisis given the tremendous uncertainties at play.

"It's unclear how much guidance they can offer given how much is out of their control," Aboulafia said. "[Boeing's] track record has been that they will say one thing, and then news is broken elsewhere ... from an airline or the FAA."