Boeing reported net earnings of $1.167 billion in Q3, -51% compared to last year. While this result is positive and better than Q2, the company’s operating cash flow dropped from 4.559 billion to -2.424 billion, reflecting marginal 737 deliveries, and advance payments, and timings of receipts and expenditures. Group revenues in Q2 were 21 percent lower at $19.980 billion.

The first nine months saw Group net earnings drop 95 percent from $7.036 billion to just 374 million. Operating cash flow was slashed from 12.375 billion to -226 million. Revenues were 19 percent lower from 72.786 billion tot 58.648. Boeing’s debt increased by $5.5 billion to 22.8 billion, partly due to the MAX problems but also related to the purchase of Embraer’s commercial program.

Not surprisingly, Commercial Airplanes performed the worst as the MAX-saga continued despite top priority being the safe return of the type to service. Q3 revenues were 41 percent lower from $14.071 billion to 8.849 billion. Loss from operations was 40 million versus a $2.033 billion profit the previous year. The operating margin dropped to just 0.5 percent compared to 14.4 percent in Q3 2018.
The nine months-results are similary somber: revenues were down 39 percent from $40.968 billion to 24.793 billion, a profit of 5.230 billion turned into a 3.813 billion loss, operating margin went from +12.8 percent to -15.4 percent.
Deliveries in Q3 dropped from 190 to 62, between January-September from 568 to 301.
Costs to produce the 737 in program in accounting quantity were up $0.9 billion.

787-rate back to 12 a month
Boeing intended to increase production of the 787 to 14 per month, but now says that ‘given the current global environment, the 787 production rate will be reduced to 12 per month for approximately two years beginning late 2020.” The 787 had a of over 530 aircraft, or over three years of production.
Prospects for the wide-body haven’t changed, Dennis Muilenburg said. Boeing had expected orders from China which haven’t materialized due to the US-China tensions. “We gave to be very disciplined in our production rate management. The decision we are announcing today is consistent with that discipline.”

First flight of the 777-9 is expected in March 2020, but the final spec of the General Electric GE9X needs to be installed. First delivery is rescheduled until early 2021. 777 Production rate will be three per month in 2020.
Rate of the 767 will increase from 2.5 to 3 a month, as previously announced.

Global Services contributed positively to the results, with revenues +14 percent to $4.658 billion and earnings +23 percent to 673 million. Boeing has not provided guidance to its full-year results.

Total costs of MAX grounding hit $9.2 billion
During the earnings call, Muilenburg said Boeing keeps 737/MAX production at 42 per month and to increase this to 57 by late 2020, but like in July he said he doesn’t rule out temporary shut-down of the production line if re-entry into service is delayed more. The uncertainty could seriously affect earnings. Total costs of grounding the MAX are estimated to hit $9.2 billion.

In preparation of the first MAX certification flight with the final MCAS and other software, Boeing has done a dry-run test last week and to do some additional runs. While working with all regulatory agencies involved, Muilenburg admitts some might be restricted by jurisdiction under their timeline before the MAX will get approval. Bringing all stored MAX back into the air will be a multi-quarter issue.

On the New Mid-market Aircraft, Muilenburg said Boeing hasn’t reached a decision-point yet. It is a project of interest, we are still looking at a middle of next decade service entry, but we will only decide when we are ready.

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