Boeing estimates that it will spend $1 billion to fix the 737 Max and has pulled its forecast of 2019
earnings because of uncertainty surrounding the jetliner, which remains grounded after two crashes that
killed 346 people.
The estimate was disclosed Wednesday in a presentation for investors as Boeing released first-quarter
financial results, which missed Wall Street expectations. A spokesman said the estimate covered higher
production costs over the next several years.
Boeing did not go into great detail on the costs of fixing flight-control software that played a role in
the crashes or the additional training for pilots. Still, the disclosures gave the clearest picture yet
of the financial damage that the accidents are causing to the aerospace giant.
Boeing CEO Dennis Muilenburg repeated that the company is making progress on updating the Max’s software
and convincing regulators to let the plane fly again.
Chicago-based Boeing Co. said its previously issued full-year guidance didn’t account for 737 Max
impacts. It plans to issue a new guidance at a future date.
The company also said it is suspending stock buybacks.
Boeing reported first-quarter net earnings of $2.15 billion, down $328 million or 13% from a year
earlier. Revenue slid $465 million or 2%, to $22.92, on fewer deliveries of 737s.
Profit adjusted to exclude non-repeating items was $3.16 per share. Analysts surveyed by FactSet expected
$3.19 per share on revenue of $22.94 billion, and both of those forecasts had been reduced considerably
in the past month.
Investors and consumers have been keeping a closer eye on Boeing since Max jets crashed in October and
March. The accidents have damaged the company’s reputation for safety, caused the worldwide grounding of
about 370 Max jets, and raised questions about the U.S. government’s approval of the plane in 2017.
The company said it is making steady progress on the path to final certification for a software update
for the 737 MAX, having conducted more than 135 test flights involving the retooled software which
limits the plane’s ability to automatically force the nose down in some circumstances.
Preliminary reports indicate that faulty sensor readings caused the software to push the noses of the
planes down in both the Oct. 29 crash of a Lion Air jet off the coast of Indonesia and the March 10
crash of an Ethiopian Airlines Max. Boeing began working on a software update to the system immediately
after the Lion Air accident.
When the market closed Tuesday, Boeing Co. shares stood 4% higher than before the first crash. After a
slump, they skyrocketed from late December until early March when the second crash occurred.
Analysts had treated the Lion Air crash off the coast of Indonesia as a one-time event and noted
confidently that Boeing was working on a software fix.
Even with a mild sell-off since the March crash, the shares began Wednesday up 16% in 2019, barely
trailing the 17% gain in the Standard and Poor’s 500.
In morning trading, the shares rose $4.17, or 1.1 percent, to $378.18.
Investors believe the market for jetliners will remain strong for many years and airlines don’t have much
choice for big planes — Boeing and Airbus form a duopoly, and both have huge order backlogs.
Last week, an expert panel of the Federal Aviation Administration 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."
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This story has been corrected to show that Boeing’s quarterly results missed estimates compiled by
FactSet.