Boeing's CEO vows grounded 737 Max will fly again by end of year
Boeing on Wednesday reported a sharp decline in revenue and profits as it continues to struggle with the fallout from two deadly crashes of its 737 Max airliner. Nonetheless, the airline maker's shares rose as the drop in earnings was not as steep as many Wall Street analysts had expected.
CEO Dennis Muilenburg also reiterated on a call with analysts that he believes the troubled 737 Max will return to service by the end of the year. But Muilenburg said if the Max is not flying again by then, the company is likely to temporarily suspend production of the jet. Boeing has a back order of 4,000 737 Max aircraft, which cost about $100 million each, and those sales are in jeopardy until the plane is approved to fly again.
The 737 Max was grounded earlier this year after two of the planes crashed in similar circumstances and killed nearly 350 passengers in the two disasters.
Boeing told analysts Wednesday the amount it estimated it will have to pay settlements tied to the accidents and the subsequent grounding of the planes had not risen in the last quarter. But the company's net income for the three months fell to $1.17 billion, $2.05 a share, from $2.63 billion in the year-earlier quarter. Revenue slid to $20 billion, down 21% from the year-ago period. Analysts had been expecting the company to earn $1.92 a share, according to FactSet.
Boeing shares rose 3% in early trading as financial results were less dire than some analysts had forecast.
Boeing is under pressure on multiple fronts, including a revelation earlier this month that a company test pilot suspected in text messages that a system meant to prevent the 737 Max from crashing had "egregious" issues. That prompted Wall Street analysts from UBS and Credit Suisse to suggest Boeing could lose as much as $53 billion from its stock market value amid mounting questions about whether the company moved fast enough to correct the aircraft's problems.
Consumer advocate Ralph Nader, who lost a grandniece in the Ethiopian Airlines crash, has called for Muilenburg and the rest of Boeing's board to resign because of what Nader says is their role in the 737 Max crashes.
On Wednesday, Boeing CEO Muilenburg said the company's chief goal is to return the 737 Max to service, but he also agreed with an analyst on the earnings call that there would probably be a gap between the time the planes are approved to fly again and when airlines start using them. The analyst noted that a number of U.S. airlines have recently said the earliest they would fly 737 Maxs again would be in February.
"Our top priority remains the safe return to service of the 737 Max, and we're making steady progress," Muilenburg said in a statement. "We've also taken action to further sharpen our company's focus on product and services safety, and we continue to deliver on customer commitments and capture new opportunities with our values of safety, quality and integrity always at the forefront."
Along with its problems when the 737 Max, Muilenburg said the company's sales had been hurt by the continued trade tension between the U.S. and China. Muilenburg said the company was monitoring and trying to influence the trade negotiations, talking to government officials on both sides. Earlier this month, President Trump announced that the U.S. had reached a verbal agreement that satisfied the first phase of his goals for the U.S.'s economic relationship with China.
Also this month, Boeing's board stripped Muilenburg of his dual role as chief executive and chairman and elevated the company's lead director, David Calhoun, to chairman. And on Tuesday, Boeing replaced Kevin McAllister, the chief executive of Boeing Commercial Airplanes, with Stanley Deal, leader of Boeing's services division.
McAllister was recruited from General Electric's jet-engine operation to run Boeing's biggest division in 2016, just months before the 737 Max went into service. Boeing did not specify whether he quit or was fired.
Stephen Gandel and The Associated Press contributed to this report.