SMM News: on July 24, Boeing said that if the global flight ban lasts longer than expected, the company will consider slowing or even suspending the production of the company's most important single-channel narrow-body aircraft, the 737MAX.
Boeing CEO Milenberg (Dennis Muilenburg) said the company's best expectation is to submit software updates and documents for the MAX aircraft to the Federal Aviation Administration (FAA) (FAA) by September, and will be approved to resume passenger flights a few weeks later. Boeing cannot afford to build and store undelivered aircraft indefinitely, he said.
After two crashes, Boeing was in a dilemma it had never had before. So far, the 737 MAX has been grounded worldwide for more than four months and has stopped delivery. Boeing shares have fallen 14% since the suspension.
On July 24, Boeing announced its second-quarter results. Revenue in the second quarter was $15.751 billion, down 35 per cent from $24.258 billion in the same period last year, according to Boeing. The net loss was $2.942 billion, the highest on record for the first quarter, compared with a net profit of $2.196 billion in the same period last year.
In addition, Boeing last week disclosed a $5.6 billion pre-tax expense to compensate for the impact of the 737MAX shutdown on airlines and renters. For the first time, the company listed cost increases that could continue for several years in the form of discounts on future aircraft orders, spare parts and services. In addition, Boeing expects the cost of manufacturing the 737 to increase by $2.7 billion as production slows.
In the commercial aircraft business, Boeing's second-quarter revenue was $4.7 billion, down 66 per cent from a year earlier, affected by the suspension of 737MAX delivery. Boeing delivered 90 new aircraft in the quarter, down 54% from a year earlier. In terms of orders, Boeing received orders for only 13 commercial aircraft in the second quarter of this year, compared with 277 in the same period last year.
In addition, as of June this year, Boeing's net orders for commercial aircraft in 2019 remained negative, losing a total of 119 net orders, of which the 737 series aircraft net orders decreased by 180.
Boeing still has plenty of reserve orders: more than 5500 aircraft worth $390 billion.
Bloomberg analyst George Ferguson believes Boeing must be prepared for anything that might happen. "as FAA officials are working with Boeing to reach a solution, the 737MAX program is likely to restart in the fourth quarter, but if something happens to extend the resumption time, Boeing will not be able to continue building the plane all the time," he said. "
Instead of suspending 737MAX production immediately after the 737MAX stopped delivery, Boeing cut production from 52 to 42 a month to keep the production line running at a lower speed. But even so, it has created a large backlog of inventories. According to a recent report by the Daily Mail, more than 35 Boeing 737MAX from Southwest Airlines have appeared in the "aircraft Cemetery" in Victorville, California.
Boeing shares fell 3.1% to $361.43 at the close of trading in New York on July 24, the second biggest drop in the Dow Jones Industrial average (Dow Jones Industrial Average).
"this is a defining moment for Boeing, and we will continue to focus on the lasting value of the safety, quality and integrity of everything we do, and strive to put the 737 MAX into use safely," said Milenberg, president and chief executive officer of Boeing. In these challenging times, our teams continue to maintain a high level of performance while fulfilling their commitments and seizing new opportunities. "
In addition to the 737 grounding affecting financial data, Boeing also revealed another piece of bad news in its financial statements. Boeing said its first flight of the 777X, its latest wide-body airliner, would be delayed until early next year because of engine problems. In addition, Boeing said it would be able to deliver the first 777X by the end of 2020, but that timetable remains uncertain.
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