Boeing Co. says the worldwide grounding and halted deliveries of its 737 Max passenger jets after two fatal crashes that killed 346 people cost it US$1-billion in the first quarter.
Chicago-based Boeing, the world’s largest maker of planes, suspended its 2019 financial outlook and share buybacks on Wednesday as it works toward regulator certification of a software update designed to prevent more crashes.
But the company signalled its biggest task could be regaining the trust of the people and airlines that fly its planes.
“We certainly regret the impact this has had on our airline customers and the flying public,” said Dennis Muilenburg, Boeing’s chairman and chief executive officer. “The confidence of the flying public is very important to us.”
Pilots from most of the 50 airlines that fly the 737 Max have tested the new software in simulated flights, and their feedback has been “excellent,” Mr. Muilenburg said on Wednesday on a conference call held to discuss the quarterly financial results.
“We plan to leverage that pilot voice. We’ll be working closely on branding and talking about training and education activities. This is a place where Boeing is going to make an investment,” Mr. Muilenburg said. “We know it’s important to earn and re-earn that trust and this will be done jointly with our airline customers, the flight crews, the flight attendants, everybody that supports these airplanes. We know it will take time.”
Mr. Muilenburg did not elaborate on any publicity, but said the company’s focus is safely returning the 737 Max to the skies.
Regulators grounded Boeing’s global fleet of about 370 Max planes after two fatal crashes of the new models in five months. In October, 189 people died when a Lion Air 737 Max crashed into the Java Sea 12 minutes after takeoff. In March, an Ethiopian Airlines 737 Max crashed shortly after taking off and killed 157 people.
Preliminary reports of investigators said the pilots lost a struggle to overcome the planes’ automated anti-stall function, which pointed the nose down, and tried to return to the airports before the crashes.
“Both accidents were a chain of events,” Mr. Muilenburg said. “And there was one common link in those chain of events – activation of the MCAS [manoeuvring characteristics augmentation system] with erroneous angle of attack data. We understand how to address that link … and that’s what that software [update] does.”
The grounding upended the flight schedules and travel plans for global airlines and their passengers. WestJet Airlines Ltd. and Air Canada parked 13 and 24 of the planes, respectively, retooled their schedules and suspended their financial outlooks. Both carriers have said they have faith in the model’s safety and neither has announced plans to cancel future deliveries, although Boeing offered no guidance on when those might resume.
The 737 Max is an updated version of a plane that has been a mainstay of passenger travel since it first flew in the late 1960s. The single-aisle, narrow-body plane was fitted with larger, more fuel-efficient engines to compete with aircraft made by European rival Airbus. The 737 Max, which has four different versions, quickly became a bestseller for Boeing, which said it has a backlog of 4,400 orders.
Mr. Muilenburg said he sees no risk to these sales. “When we take a long-term view here, we don’t see any change. We are continuously engaged with our customers. We have deep regret on how this has impacted their operations to date. And we’re doing everything we can to get the airplane back up and flying. Our customers are eager to do that as well.”
Boeing said the US$1-billion in costs tied to the 737 Max problems were mainly a result of less production, labour expenses and fixed costs. Boeing is producing 40 737 Max jets a month, down from the usual 52.
The groundings and production cuts happened deep into the first quarter, so Boeing could face a bigger impact in the current quarter.
For the first three months of 2019, Boeing said cash flow fell to US$2.79-billion from US$3.14-billion in the same period a year earlier. Analysts expected US$2.82-billion.
Higher revenue in Boeing’s defence and service divisions partly offset the decline on 737 Max sales. Revenue fell by 2 per cent to US$22.92-billion, missing analysts’ estimates of US$22.98-billion. Boeing’s per-share core earnings, which exclude certain items, fell to US$3.16 from US$3.64 a year earlier, meeting analysts’ expectations.
Boeing’s stock price, which has fallen by 16 per cent since March 1, was little changed on Wednesday.