Boeing swings to annual loss as 737 Max costs climb to $25.9 billion

The grounding of Boeing's 737 Max jets forced the planemaker to freeze production of the aircraft and let to the ouster of former CEO Dennis Muilenburg.
The grounding of Boeing's 737 Max jets forced the planemaker to freeze production of the aircraft and let to the ouster of former CEO Dennis Muilenburg.PHOTO: EPA-EFE

BENGALURU/WASHINGTON - Boeing expects nearly US$19 billion (S$25.9 billion) in costs related to the grounding of its 737 Max jets, the US planemaker said on Wednesday (Jan 29) as it swung to its first annual loss since 1997 and indicated it would again cut production of its bigger 787 Dreamliner aircraft.

The Dreamliner widebody is the main source of cash for Boeing as it battles the global grounding of the smaller 737 Max following two crashes that killed 346 people.

The Max grounding forced the planemaker to freeze production of the aircraft and led to the ouster of former CEO Dennis Muilenburg.

"We recognise we have a lot of work to do," Boeing president and CEO David Calhoun said in a statement.

Boeing shares rose 3 per cent in pre-market trading as some analysts had expected an even larger charge for 737 Max costs.

The charge includes US$8.3 billion to compensate airline customers that are cancelling flights and scaling back growth plans in a hit to profits while their Max jets remain grounded and US$6.3 billion for production costs in 2019.

Boeing said it estimated another US$4 billion charge in 2020 as it gradually resumes 737 Max production at low rates.

Core operating loss was US$2.53 billion, or US$2.33 per share, compared with a profit of US$3.87 billion, or US$5.48 per share, a year earlier.

Analysts on average expected Boeing to post earnings per share of US$1.47 in the quarter, though several had predicted a loss amid a wide range of forecasts due to uncertainties over the cost of the 737 Max crisis.

 
 
 
 

Adding to Boeing's pain, demand for its bigger and more profitable jet - the 787 Dreamliner - has waned in the face of the US-China trade war, prompting the company to cut production, hurting cash flow at a time when its debt is mounting.

Boeing, which is producing the 787 Dreamliner at 14 aircraft per month, said in October it expects to lower the production in late 2020 to 12 per month, amid a drought of orders from China.

The company now expects to further lower 787 Dreamliner production to 10 per month in early 2021.

Boeing reported negative free cash flow of US$2.67 billion for the fourth quarter ended Dec 31, compared with a positive free cash flow of US$2.45 billion a year earlier.