Boeing abandons financial outlook, sees $1 bln in extra cost on 737 MAX

Boeing Co on Wednesday abandoned its 2019 financial outlook, halted share buybacks and said lowered production due to the grounding of its fastest-selling 737 MAX jet after two fatal plane crashes in five months had cost it at least $1 billion so far.

The world's largest planemaker is facing one of the biggest crises in its 103-year history following the disasters on Lion Air in Indonesia on Oct. 29 and another on Ethiopian Airlines on March 10, which together killed all 346 on board.

Chicago-based Boeing is now reckoning with a blow to its reputation and the financial cost of getting the planes back in the air. It met sharply lowered Wall Street profit estimates, largely due to stopping deliveries of the 737 MAX jets and a slowdown in production.

The production slowdown alone has cost it $1 billion so far, the company said, because the lower rate means the planemaker has to pay more for parts, which are priced according to the volume Boeing buys.

Boeing also booked unspecified charges related to developing a MAX software fix and pilot training. Chief Executive Dennis Muilenburg told analysts on a conference call that Boeing has confidence in its software fix and expects a certification flight with the U.S. Federal Aviation Administration in the "near term" after completing more than 135 test and production flights.

"The timing of return to service for that MAX will continue to be paced by ongoing work with global regulators and our customers," Muilenburg said. "If there's something that we can do to make airplane development programs or the certification process better and safer, we will pursue it."

A fuller picture of how Boeing plans to repair its image with the flying public and stem further financial damage will not emerge until the end of the second-quarter as 737 production cuts did not begin until mid-April.

Investors are also looking for details on how the MAX crisis will hit development of Boeing's all-new 777X twin-aisle jetliner and a potential new mid-market airplane, known in the industry as NMA, which is central to its fight with arch-rival Airbus SE in the lucrative longer-haul market and also is expected to lay the industrial foundation for an eventual 737 replacement.

Muilenburg said the company did not see any changes to the underlying certification process for 777X in light of the MAX reviews, and continues to work "in parallel" on plans for NMA, although he stressed the 737's return was a higher priority.

Boeing said on Wednesday it sped up production of its 787 Dreamliner to 14 aircraft per month from 12 in the first quarter, while the 777X remained on track for flight testing this year with delivery in 2020.

Boeing shares rose 1.5 percent.

Reuters