Jet Groundings Batter Boeing’s Earnings

Boeing Co. (NYSE: BA) has acknowledged that its earnings have taken a hit due to the global grounding of its 737 Max jets after two deadly plane crashes involving the model. A Lion Air crash in Indonesia on Oct. 29 killed all 189 people onboard. An Ethiopian Airlines crash on March 10 killed all 157 people aboard. The 737 Max planes were grounded in after the Ethiopian Airlines crash.

An anti-stall system known as the maneuvering characteristics augmentation system (MCAS) was involved in both fatal incidents. Boeing CEO Dennis Muilenburg has acknowledged that the maneuvering system contributed to the crashes and said the aerospace giant was making “steady progress” on a fix. The company has not given any guidance on when the 737 Max flights and deliveries will resume.

During its earnings report, Boeing announced that it was taking an initial $1 billion hit on the global grounding of the aircraft. The initial cost covers lower production and loss and delays of deliveries, but does not include unspecified costs for software updates. The figure doesn’t include the costs of additional training or the liability of pending lawsuits either, so the final figure could be much higher.

Boeing reported its worst quarterly results in years for the first quarter of its fiscal year. Boeing recorded net earnings of $2.15 billion, down 13.2 percent from a year earlier but still exceeding expectations of $2 billion in earnings. The manufacturer posted revenue of $22.9 billion for the quarter, down 2 percent from the same quarter a year earlier. Analysts were expecting revenue of $23 billion.

Boeing warned that the global grounding of the 737 Max would force it to eventually revise its projected earnings for 2019. The company stopped its popular share buyback program weeks ago. Muilenburg said fixing the Max and having the changes recertified is the company’s top goal. He said, “We’re very confident that when the fleet comes back, the Max will be one of the safest airplanes ever to fly.”