Boeing Commercial Aircraft posted a 9% fall in revenue year on year to US$11.8bn from US$12.9bn for Q1 2019. Earnings were down a huge 21% at under US$2bn. Boeing also disclosed that the changes it has had to make to the 737 production process as a result of the crisis will cost an extra $1bn over the next few years.
Meanwhile, one leading shareholder advisory firm has informed its clients that Dennis Muilenburg should be stripped of his dual role as chairman and chief executive of Boeing. It was obvious this would be coming and given the 787 and 737 problems over the past few years it is a no brainer that Boeing should be sorting out its leadership. The question is will Muilenburg resist, forcing maybe a Trump Tweet asking for him to go? We also need to remember that Boeing will also take a hit in Q2 and maybe beyond due to the cut in 737 MAX production from 52 to 42 aircraft because the company will still be paying suppliers for deliveries at the contracted rate of 52 aircraft per month, there will also be additional costs mounting for storage. Boeing stated that it is on track to re-certify the 737 MAX during the summer of 2019 but that is a rose tinted view of the current situation since the statement is limited to the US authorities and Europe, China will most likely not fall straight in behind the FAA on this one given the poor performance to date of the 737 MAX.
We also need to be mindful that the 737 MAX problems will roll on with court action against Boeing, coupled with reparation payments to airlines and lessors. None of that was mentioned by Boeing today, but it is all certain to happen. All this following on from what many consider to have been a shabby Q1 2018 for Boeing due to 787 problem costs running through the books then (and still), thus maybe one should compare the Q1 2018 projections (not actuals) to the Q1 2019 actuals to see how far Boeing has fallen of late.
So Boeing’s results today were shrouded in uncertainty and the only thing we do know is that Boeing has dropped the ball in fantastic fashion. What company would add a critical warning light as an optional extra?
Adjusted company earnings for Boeing per share for the first quarter fell 13 per cent to $3.16 from $3.64 in the year earlier period. First-quarter revenues for Boeing were down 2% year on year to US$22.91bn from US$23.38bn and operating earnings fell 18% to US$2.35bn from US$2.87bn.
Maybe the real winner in all this is CFMi, which is able to sort out the LEAP engines on the MAX aircraft while they are all on the ground quietly and quickly at much reduced cost to them.
So in the massive rush to produce new aircraft over the past 15 years, what have we seen? Well it is true to say that the one aircraft that had to go back and be totally redesigned is the one aircraft that is flying around with zero problems – namely the A350. The C-Series/A220 was an overengineered money pit, which also saw a redesign or two and that shows since the aircraft is currently exceeding expectations. All other rushed-out-of-the-door aircraft have suffered problems, primarily due to the engines, granted, but nevertheless you have to go all the way back to the launch of the de Havilland DH 106 Comet to see aircraft problems on a scale with what we have today. That, if nothing else, is a warning that modern testing that is supposed to prevent catastrophic failure is not 100% successful and will likely never be so.