- Boeing’s profits have plunged in the aftermath of two deadly crashes involving its 737 Max planes and the subsequent grounding of the planes worldwide.
- Boeing on Wednesday announced that its core profits fell 21% in the first three months of 2019 compared with the same period last year.
- Boeing has cut production and has not received any new orders since the planes were grounded around the world, leading to canceled flights and increased scrutiny on the aviation giant.
- According to Bloomberg, the 737 Max was set to become Boeing’s largest source of both revenue and profit in 2019.
- Boeing is also facing a slew of related problems, including lawsuits from shareholders and victims’ families and a harsh spotlight on its processes.
- Visit Business Insider’s homepage for more stories.
Boeing’s adjusted profits fell by more than a fifth in the first three months of the year, the company said Wednesday in its first-quarter results, following two deadly plane crashes and the grounding of its 737 Max planes worldwide.
Core profits were $1.98 billion, down from $2.51 billion over the same period in 2018, a fall of 21%.
The stricken aviation giant posted core earnings of $3.16 a share, missing the $3.25 that analysts surveyed ahead of the release were expecting. Its revenue was broadly in line with expectations at $22.9 billion.
Boeing also announced that it was withdrawing its 2019 financial forecasts amid efforts to fix the planes, effectively acknowledging that it was unsure what its financial performance would look like for the rest of the year.
The earnings were the first released by the company since its 737 Max jets were grounded around the world in response to the fatal Ethiopian Airlines crash in March. In total, nearly 350 people were killed in that crash and a Lion Air crash in October.
The preliminary reports into both crashes identified issues with the 737 Max 8’s MCAS automated anti-stall software, and the planes are expected to remain grounded until a software fix Boeing has worked on is approved by the Federal Aviation Administration and regulators around the world.
Foto: Boeing airplanes, many of which are grounded 737 Max aircraft, at Boeing Field in Seattle.sourceREUTERS/Lindsey Wasson
Boeing apologized for the crash and announced that it was cutting production of the 737 Max, from 52 aircraft a month to 42.
The Barclays analyst David Strauss predicted in an April 15 report that the crisis could result in a $10 billion drag on Boeing’s finances in 2019, Bloomberg reported.
According to Bloomberg, the 737 Max was set to become Boeing’s largest source of both revenue and profit in 2019.
“The 737 is very profitable to Boeing because of the high volume, the resulting production efficiencies and the amortization of the capital investment over the program’s decades,” the ratings agency Moody’s said in a note in March.
Moody’s noted that Boeing’s operating profit margin was $12 million to $15 million on each 737 Max 8 it delivered to customers, Business Insider previously reported.
The crashes also put a wider spotlight on how Boeing and federal regulators certify planes, leading to federal investigations.
Boeing CEO Dennis Muilenburg issued an apologythis month, where he said Boeing was “sorry for the lives lost” and pledged to win back flyers’ trust.
He said the company was working with its software update to “ensure accidents like that of Lion Air Flight 610 and Ethiopian Airlines Flight 302 never happen again.”
Foto: Boeing CEO Dennis Muilenburg.sourceBEN STANSALL/AFP/Getty Images
Despite Wednesday’s earnings, some analysts believe that the company will bounce back in reasonably short order.
Before the release, George Ferguson, an analyst for Bloomberg Intelligence, told Bloomberg Newsthat he thought Boeing would accelerate production of the 737 Max as soon as it was cleared to fly again, making up for time lost during the grounding.
“I think the most likely scenario is this airplane is flying again by the end of the third quarter, and Boeing goes hammer and tongs to get the deliveries out the door by the end of the year,” he said.