Boeing Co on Wednesday reported its biggest loss ever as the 737 MAX crisis drags on, with the company warning that it could be forced to temporarily halt production of the airplane if the grounding is extended much longer.
The aviation giant’s troubles have been mounting since the MAX was taken out of service worldwide in March following two deadly crashes that claimed 346 lives. It has already set aside nearly US$5 billion to compensate customers.
However, the warning it might have to suspend production of the aircraft jolted Wall Street, prompting losses to accelerate during a late-morning conference call with Boeing executives that reinforced the cloudiness surrounding the outlook.
Getting the MAX back in the air is a “complex” multi-regulator process “that will take time to get done,” Boeing CEO Dennis Muilenburg said.
“We have a clear understanding of the work that has to be done, but there is still uncertainty in the timeline,” he added.
Boeing reported losses of US$2.9 billion for the second quarter, a huge drop from the US$2.2 billion profit posted in the same period last year.
Revenue in the latest quarter tumbled 35.1 percent to US$15.8 billion, reflecting the hit suffered due to halted deliveries of the 737 MAX, a top-selling plane.
Adding to the confused outlook, Boeing has still not updated its full-year profit forecast after withdrawing its targets in April due to uncertainty about the MAX.
At the same time it boosted dividend payments in the second quarter. Compared with last year, Boeing spent US$1.2 billion on dividends, up 20 percent from the period a year prior.
Temporarily halting output “is not something we want to do, but it is an alternative we have to prepare for as a smart part of our thorough and disciplined process here to make sure we’re covering all scenarios,” Muilenburg said.
Boeing in April cut production on the MAX to 42 per month from 52, storing planes until the jet is cleared to fly, but it has not cut jobs at its factory in Washington state.
Airlines around the world have repeatedly pushed back the target date for returning the jets to service as the regulatory time frame has dragged on.
The US Federal Aviation Administration (FAA) last month identified problems with microprocessor that extended the timeline.
Boeing is developing a software fix to address a problem its Maneuvering Characteristics Augmentation System linked to both crashes.
Muilenburg said that the company is in daily contact with the FAA and still expects to submit its software fix to regulators in September, with approval about a month later.
However, that time frame is “dynamic,” Muilenburg added.
He also said that the company is in “the middle of working our way” through the FAA microprocessor issue.
“We know we’re making progress, but until we complete all of the certification activities, there’s always some risk of new items opening up,” he said.
Boeing shares have lost about 14 percent since the Ethiopian Airlines crash in March, while the broader Standard & Poor 500 has gained about 10 percent.
Boeing shares ended 3.1 percent lower at US$361.43 in Wednesday trading.
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