The global grounding of Boeing’s 737 Max jets will cost the company more than $1bn, the company said on Wednesday.
The jets were grounded after two fatal crashes that killed 346 people, triggering investigations into the accidents across the world and engulfing Boeing in one of the biggest crises in its history.
In its first quarterly earnings report since the Lion Air and Ethiopian Airlines disasters, Boeing announced it had abandoned its 2019 financial outlook and halted share buy-backs in mid-March as it deals with the crisis.
Dennis Muilenburg, Boeing’s chairman and chief executive officer, said: “We have great sorrow for the families affected. This weighs heavily on us.”
He said the company’s first priority was to get the 737 Max back in the air and that the company was working closely with the Federal Aviation Administration (FAA) and other regulators to end the aircraft grounding.
The announcement was a sharp reversal from Boeing’s last earnings report in January, when executives unveiled plans to deliver more than 900 jetliners this year alongside higher sales and profits.
The world’s largest plane-maker reported first-quarter revenue and cashflow below sharply lowered Wall Street estimates, largely due to stopping deliveries of the 737 Max jets, which were grounded in March after the two crashes.
The crashes caused regulators worldwide to ground the 737 Max and triggered investigations into the aircraft’s development by federal transportation authorities and the US Department of Justice.
Although safety experts have raised some questions over crew performance in both crashes, the regulatory fallout has been dominated so far by questions over anti-stall software known as MCAS, which Boeing has acknowledged was a common link in the separate chains of events leading to both crashes.
Boeing’s close relationship with the FAA and its role in the certification of the plane have come under scrutiny. Calvin Scovel, the Transportation Department’s inspector general, is conducting an audit of the FAA’s certification of the 737 Max.
Muilenburg said he could not give further details about the ongoing investigations but denied that anything had “slipped through the certification process”. He said erroneous data from the planes’ systems plus “actions or actions not taken” had contributed to the crashes.
This week shareholder advisory group Pensions & Investment Research Consultants (PIRC) opposed Muilenburg’s re-election as chairman and chief executive officer. “No one individual should have unfettered powers of decision,” PIRC said.
Boeing cut production of the jets following the crashes to 42 aircraft per month, down from 52, and its operating cash flow in the first quarter was about $350m lower than a year earlier.
Boeing also said it booked unspecified charges related to developing a fix for MCAS and pilot training, and was making steady progress toward certification of the software after completing more than 135 test and production flights.
The company said it would be issuing a new forecast in the future when it has more clarity around the issues surrounding the 737 Max.
Last week, an expert panel of the FAA judged that a software fix to the Max would be “operationally suitable,” and that airline pilots familiar with previous versions of the 737 won’t need additional time in flight simulators to learn about the new software that is unique to the Max.
Jim Corridore, an airline analyst for CFRA Research, said that while Boeing still has much work to do, the FAA panel’s determination “shows that the return of the plane to flying is now a ‘when’ question rather than ‘if’ … we remain firm in our view that Boeing will survive this with its order book largely intact.”
