Boeing Officials Say Company Is Taking Financial Hit From Grounding Of 737 Max Jets
ARI SHAPIRO, HOST:
Today Boeing officials acknowledged that the company is taking a financial hit from the grounding of its 737 Max airplane. Regulators around the world grounded the plane after two crashes. Boeing estimates that the 737 Max crisis will cost more than a billion dollars initially.
NPR's Daniella Cheslow reports analysts who follow the company say the final bill could be much higher.
DANIELLA CHESLOW, BYLINE: If you look at a chart of Boeing's stock performance over the last three years, it's a remarkable upward climb. The stock has more than tripled in value with quarter after quarter of rising earnings. Today's earnings call was different. It was the first since the planes were grounded after crashes that together killed 346 people. Pilots in both flights appeared to struggle to overcome software Boeing installed to keep the new-designed planes flying safely. CEO Dennis Muilenburg started on a somber note.
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DENNIS MUILENBURG: We know every person who steps aboard one of our airplanes places their trust in us, and we are committed to earning and re-earning that trust and confidence.
CHESLOW: And then he went through the numbers. Profits are down 13% compared to this time last year. The main cause of that pain - with 737 Max planes grounded, Boeing has not been able to make deliveries on new jets that were ready to go, and it took no new orders for any 737s in March. Analyst Sheila Kahyaoglu of Jefferies said 737s brought in more than a quarter of Boeing's revenues last year.
SHEILA KAHYAOGLU: The 737 program is very profitable, and it is a large portion of revenue. So if you're not delivering them, you're going to have significant volatility.
CHESLOW: Still, Boeing's profits were more than $2 billion in the first three months of the year. A large part of that came from defense contracts and aerospace services. Seattle-based analyst Michel Merluzeau says these are proof that Boeing is still a healthy company.
MICHEL MERLUZEAU: You've got to look at the Boeing portfolio as more than just one aircraft of course. And it is a strongly diversified portfolio. And there is a strong outlook for the defense sector in particular.
CHESLOW: The 737 Max will not return to flight until the FAA and other regulators around the world approve a software fix and new pilot training. Boeing is still working on those. In a sign of its focus on solving the Max problem, Boeing said today it's pausing its program of buying back company shares. For years, Boeing had used its massive cash flow to repurchase shares, a practice which raised share value. Howard Wheeldon, an aviation analyst based in the U.K., says that makes sense.
HOWARD WHEELDON: It's not a good time to be seen to be buying back your shares when you have such big issues to face in your revenue and earnings outlook over the next two years.
CHESLOW: In its January earnings, Boeing predicted revenues of about $110 billion this year. But Muilenburg says he's scrapping that guidance.
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MUILENBURG: Our previously issued 2019 financial guidance does not reflect the Max impacts.
CHESLOW: Muilenburg says he won't have a new forecast until he knows when the planes can fly again. Daniella Cheslow, NPR News.
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