UNITED STATES – Boeing Co, an Icon of American manufacturing has reported its first annual loss since 1997 as 737 MAX costs doubled to nearly $19 billion.
Boeing’s core operating loss was $2.53 billion, or $2.33 per share, compared with a profit of $3.87 billion, or $5.48 per share, a year earlier.
Boeing also reported negative free cash flow of $2.67 billion for the fourth quarter ended Dec. 31, compared with a positive free cash flow of $2.45 billion a year earlier.
Analysts on average expected Boeing to post earnings per share of $1.47 in the quarter, though several had predicted a loss amid a wide range of forecasts due to uncertainties over the cost of the 737 MAX crisis.
Boeing, was forced to halt the production of the once fast-selling 737 MAX which was grounded in March 2019 even as it struggles to restore public confidence and recover from the biggest crisis in company history.
Costs related to the 737 MAX grounding reached $14.6 billion in 2019 and the planemaker warned of another $4 billion in charges in 2020 due to the expense of slowly re-starting production.
Boeing had estimated a $9.2 billion price tag for the MAX fallout in the third quarter.
The MAX charges include $8.3 billion to compensate airline customers that are canceling flights and scaling back growth plans in a hit to profits while their MAX jets remain grounded.
Adding to Boeing’s pain, demand for its bigger and more profitable jet – the 787 Dreamliner – has waned in the face of the U.S.-China trade war.
Boeing had already announced in October, 2019 plans to lower the production rate for its 787 Dreamliner to 12 per month in late 2020 from 14 and now expects to cut the rate to 10 per month in early 2021, hurting cash flow at a time when its debt is mounting.
Deliveries of hundreds of the 737MAX jets remain frozen while Boeing updates the flight control system and software to address issues involved in both crashes.
In a respite from the crisis over the MAX, Boeing in January, 2020 successfully staged the first flight of a larger jet, the 777X.
Boeing’s Chief Financial Officer Greg Smith has notes that due to the current state that the company finds itself in cash flow recovery is not expected to start until 2021.