Boeing on Wednesday registered its first annual loss in more than two decades. The aircraft maker said that it expects the loss to cross over $18 billion. The company cited the grounding of 737 Max as the primary reason behind the loss, which will also bite into its revenues this year.
Alongside this, the company said that it will slash production of its 787 Dreamliner, which is its biggest revenue generator right now. Boeing's annual loss does not come as surprise as the company has been ailing for months now with no assurance on the return time of its grounded 737 Max.
Boeing continues to bleed
Boeing, which reported its quarterly results on Wednesday, said that the grounding of its once highest-selling 737 Max has already cost the company $14.6 billion in 2019 and it could add another $4 billion in 2020 owing to expenses of halting and then resuming the production of the troubled jet. The new figure is significantly higher than previous estimates.
The company had earlier estimated that the grounding of 737 Max would cost the company around $8 billion. In total, the estimated cost now equals almost 20 percent of the aircraft maker's total sales before Max was grounded. This is also the first time the company has registered an annual loss since 1997. Boeing registered revenues of $17.9 billion in the quarter, down 37 percent year over year.
Crisis deepens for Boeing
Boeing continues to grapple with the 737 Max crisis, which remains grounded since March following two fatal crashes in Indonesia and Ethiopia that killed 346 people. The company said that the cost of compensating airline companies that are suffering owing to the grounding of the aircraft is now expected to reach $8.3 billion, up from its previous estimate of $5.6 billion. This includes both cash compensation and discount on future sales.
Moreover, the grounding of the airline is now expected to add to the overall cost to produce the 737 Max and to escalate to $6.3 billion in the years to come, than the previous estimate of $3.6 billion. With no precise timeline for the return of troubled 737 Max, Boeing continues to face challenges in several other areas of its business including the temporary halt in production of the 737 Max.
However, the company is now largely banking on the abilities of its new CEO David Calhoun, who took charge earlier this month following the ouster of its previous chief Dennis Muilenburg. A lot of the responsibility of bringing the company back on its feet now depends on Calhoun, which also includes rebuilding investor faith and resurrecting the image of the company that has been damaged by some damning revelations lately.