Boeing profits have fallen 95% this year as the 737 Max crisis shows no sign of slowing

Boeing 737 Max
Boeing 737 Max

David Ryder/Getty Images

  • Boeing's third-quarter results on Wednesday revealed that the airline's profits had fallen 95% so far in 2019, a year when it has grappled with the aftermath two 737 Max plane crashes that killed 346 people, grounded the plane around the world, and left Boeing fighting a reputational crisis.

  • The results were released a day after a senior executive was ousted and on the same day when those investigating the first of the two disasters, involving a Lion Air flight in Indonesia, told victims' families that the plane's design contributed to the crash.

  • Boeing had already announced billions in losses while facing lawsuits and demands for compensation from airlines over the crashes and the 737 Max's subsequent grounding.

  • Some analysts had also downgraded Boeing's stock even before Wednesday's results were posted, saying they could not recommend people buy it amid the crisis.

  • Read more stories like this on Business Insider.

Boeing's third-quarter results on Wednesday revealed that the aviation giant's profits had fallen 95% in the first nine months of 2019 compared to last year.

Its net earnings for the quarter also fell 51% compared to the same period in 2018, and the company said it had a negative free cash flow of $2.89 billion for the quarter, compared to a positive free cash flow of $4.10 billion for the same period last year.

Here are the key takeaways:

  • Revenue was down 21% compared to the third quarter of 2018, from just over $25 billion to just under $20 billion

  • Earnings from operations fell 97% compared to the first nine months of 2018, from $7 billion to $229 million.

  • Its core operating margin fell three percentage points compared to the third quarter of 2018, from 7.5% to 4.5%.

Boeing also announced plans to slow production of the 787 Dreamliner for two years beginning in late 2020, blaming "the current global trade environment."

The results come as Boeing continues to grapple with the grounding of the 737 Max which has not flown commercially since March, when the second crash occurred. The grounding has led airlines to demand compensation, and in some cases refunds as uncertainty over when the plane can fly again continues.

Ethiopian Airlines Boeing 737 MAX
Ethiopian Airlines Boeing 737 MAX

SULEIMAN MBATIAH/AFP via Getty Images

CEO Dennis Muilenburg said that the company was making "steady progress" on getting the plane back into service: "Our top priority remains the safe return to service of the 737 Max." In its second-quarter results, Boeing said that it lost nearly $3 million, on top of a $5 billion already factored in over the continued grounding of the plane around the world.

Steve Dickson, the administrator of the US Federal Aviation Administration, said on Tuesday that Boeing had made progress with its updates to the plane, but that there was "considerable work to do" before the planes could be certified to fly again.

Boeing said that it "continues to work with the FAA and global civil aviation authorities to complete remaining steps toward certification and readiness for return to service."

It also acknowledged that global regulators have decided to examine the plane themselves instead of trusting the US Federal Aviation Administration (FAA) to re-certify the plane. Boeing said that the different "regulatory authorities will determine the timing and conditions of return to service in each relevant jurisdiction."

Read more: Pilots and a growing number of airlines are demanding payback from Boeing for its 737 Max disasters — here's the full list.

Boeing has said that it wants the planes back in the air by the end of this year, but Europe's aviation regulator, the European Union Aviation Safety Agency (EASA), which is doing its own certification tests of the plane, does not expect the planes to return until January at the earliest, Reuters reported.

Boeing said on Wednesday that its results assume the plane will be approved to fly in the final quarter of the year, though an increasing number of airlines have cancelled flights involving the plane into the start of 2020, and that it will "gradually increase the 737 production rate from 42 per month to 57 per month by late 2020.

Boeing has slowed its production of 737 Max planes as the grounding drags on.

The results come as a judgment day for Boeing, a day after a senior boss was ousted

Boeing posted its third-quarter results the day after Kevin McAllister, the President and CEO of Boeing Commercial Airplanes — the Boeing unit that builds passenger planes — lost his job in the most significant management change in the company since the crashes.

The relese of the third-quarter results also coincide with news that crash investigators in Indonesia told relatives of the first fatal crash, by a Lion Air plane in October 2018, that design issues with the 737 Max plane contributed to the fatal plunge, alongside "deficiencies" in the flight crew's communication.

Some analysts are now starting to turn against Boeing, with both UBS and Credit Suisse no longer recommending that investors buy Boeing shares before the results were posted.

Kevin McAllister Boeing Commercial Airplanes CEO
Kevin McAllister Boeing Commercial Airplanes CEO

REUTERS/Pascal Rossignol

Credit Suisse analyst Robert Springarm said on Monday that "we can no longer defend the shares in light of the latest discoveries, discoveries which significantly increase the risk profile for investors" after Reuters reported internal messages from a former Boeing pilot who said the Max software was acting erratically for months before the plane started flying.

Read more: Boeing 737 timeline: From the early days to the grounding of the 737 Max after 2 fatal crashes that killed 346 people 5 months apart

Boeing's previous results also suggested that the Washington state-based aviation giant could soon lose its crown as the world's largest planemaker, as its deliveries fell behind its European rival Airbus. Airbus has not yet posted its third-quarter results, so comparison is available yet.

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