- Giant reported loss instead of predicted gain
- Further questions linger about Boeing’s safety
- Will public trust Boeing going forward?
Early on Wednesday, Boeing headed to issue its earnings call premarket, which will attract a lot of attention due to the continuing saga around the 737 MAX.
The plane has been grounded for nearly a year after two fatal crashes. The accidents sent engineers scrambling to find some type of solution to the issues surrounding the aircraft, supposed to be the next generation of profits.
The controversy even forced Boeing to fire Dennis Muilenberg, the previous CEO. The company has no concrete time frame as to when the plane will be able to fly again, as it bleeds billions of dollars from the company’s profit margins. In fact, the company had to report its first annual loss in well over two decades.
The announcement caused turmoil in premarket trading
The announcement has caused turmoil in premarket trading. Boeing announced a $17.9 billion revenue, which was much lower than the anticipated $21.73 billion Wall Street was looking for.
Furthermore, the EPS figure came in at $-2.33, which was much lower than the $1.30 level of profit that was expected. GAAP loss per share was $1.79 for the quarter as well.
Cash flow has hemorrhaged to the loss of $2.2 billion, which is mainly due to the aircraft being idled. That said, Boeing still paid out $1.2 billion worth of dividends – something the company has pledged to do going forward, despite the fact that there is a lot of uncertainty around the plane.
David Calhoun, the new Boeing CEO, stated: “We recognize we have a lot of work to do.” He also said they were going to be more transparent after reports came out that Boeing was aware of the issues prior to the fatal crashes. He added that the company was fully committed to restoring the 737 MAX back to service.
“Safety will underwrite every decision, every action and every step we take as a move forward,” Calhoun said, adding: “Fortunately, the strength of our overall Boeing portfolio of businesses provides the financial liquidity to follow a thorough and disciplined recovery process.”
During the crisis, Boeing has had to take out $12 billion in loans to bolster its finances. There are concerns that the impact of exports coming out of Boeing will have an effect across the US economy, as well as on several other industries that are auxiliary to the company.
Furthermore, Boeing’s operating margin from commercial airplanes plunged by over 30% in Q4 as costs surged, which reflected 737 diminishing deliveries. Year-over-year deliveries plummeted by 67% while revenues fell by 55%.
Will airlines and travelers avoid the ill-fated 737 MAX?
The biggest problem going forward is the fact that the general public could very well go out of its way to avoid flying on a 737 MAX, meaning that more pain could follow if airlines choose to forgo buying the jet. The main issue the public will have with Boeing is that the company knew there were engineering issues with the plane before they let it fly.
While this has not been a major issue yet, Airbus will most likely be among the main beneficiaries of this situation.