Boeing Reports $11.9 billion Annual Loss After Hit on 777X Delay

New York, Jan 27 (AFP/APP): Boeing concluded a bruising 2020 on Wednesday with another unpleasant surprise: a $6.5 billion hit from delays to its new 777X plane that exacerbated its annual loss.

The aerospace giant, which saw its revenues ravaged by the commercial airline downturn due to Covid-19 and the 20-month grounding of its 737 MAX model, now expects first deliveries of the widebody 777X in late 2023, compared with the earlier time-table of 2022. The accounting for the 777X prolongation pushed Boeing’s fourth-quarter loss to $8.4 billion, plunging its tally for all of 2020 to $11.9 billion in the red.

The past year “was a year of profound societal and global disruption which significantly constrained our industry,” said Chief Executive Dave Calhoun. “The deep impact of the pandemic on commercial air travel, coupled with the 737 MAX grounding, challenged our results. “I am proud of the resilience and dedication our global team demonstrated in this environment as we strengthened our safety processes, adapted to our market and supported our customers, suppliers, communities and each other.”

In light of radically worsened market conditions, Boeing has taken a sledgehammer to costs, announcing job cuts of some 30,000 employees over two years. The company also completed a $25 billion bond offering to provide liquidity to ride out the downturn. For the fourth quarter, Boeing reported a bigger-than-expected loss of $8.4 billion after accounting for a $6.5 billion hit from the 777X. Revenues fell 14.6 percent to $15.3 billion.

Repeated delays

The fourth quarter also included a number of other one-time hits: payments to the US Justice Department to settle criminal charges over the 737 MAX crashes, the altered production schedule for the same aircraft, production issues on the KC-46 US military tanker and the drag from anemic demand for Boeing’s global services business. Each of these items amounted to a hit of between $275 million and $744 million.

As far as the 777X, Boeing has now pushed back the timeframe at least three times. When it delayed the program in 2020, Boeing said the prolongation reflected the need to incorporate lessons from the 737 MAX certification, as well as uncertainty about airline demand due to the pandemic’s travel downturn. Boeing described similar dynamics on Wednesday. Calhoun, in an interview with CNBC, said these changes mean “it’s going to be a little more costly and it’s going to take a little longer” to certify the 777X.

But he said the plane — ideal for international flights — would be a hit when it is finished. “We love the airplane,” Calhoun said, adding, “we think it’s going to be one of the real money makers for our company.” The MAX saga weighed on the company’s results over the last two years, but the outlook for that program has improved after commercial flights on the plane resumed in late 2020 following a lengthy grounding caused by two fatal crashes.

Since the model was cleared to resume service, Boeing has delivered more than 40 MAX planes and the aircraft has safely flown more than 2,700 commercial flights on five carriers. However commercial air travel overall is not expected to make a full recovery until after 2021.

Disappointing

Calhoun expressed disappointment at the glitchy rollout of the coronavirus vaccine, saying he now expects significant uptick in travel in the second half of 2021 rather than early summer. “I think all of us were hoping that vaccine distribution might go a little more smoothly,” he told CNBC. “I do think it’s going to come back. I’ve said it all along that there will be robust demand when the time comes. There’s a lot of pent-up demand.”

Peter McNally, analyst at Third Bridge Group, said the results were “disappointing” in several ways and that the company continued to burn through cash while it awaits a recovery in commercial plane travel. McNally said the return of the MAX was good news, but that “the slower recovery and difficult financial position for Boeing will weigh on the rest of the aerospace supply chain.”

Shares of Boeing tumbled 3.0 percent to $195.91 in mid-morning trading.

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