Boeing reports huge losses and postpones delivery of 777X aircraft

Boeing ended 2020 with a sharp increase in losses due to a write-off of $ 6.5 billion in losses due to a delayed delivery program for the wide-body 777X. The EU lifted the 737 MAX flight ban, followed by the US, Canada and Brazil.

Boeing (BA) shares, which lost 36.2% in the past 12 months, were down on Wednesday after posting significantly larger 4Q losses than market analysts expected.

2020 was the worst crisis in Boeing history. The twenty-month ban on Boeing 737 MAX passenger aircraft and the COVID-19 pandemic, which dealt an unprecedented blow to the global aviation industry, was followed by huge losses to the aircraft manufacturer.

Boeing was forced to sharply cut production of its passenger aircraft due to falling demand.

In the three months ending in December, Boeing reported:

  • Loss per share increased 85% year-over-year to $ 15.25, far from the analyst average of $ 1.80 loss per share.

  • Boeing suffered a whopping $ 6.5 billion in losses over the past quarter due to the delayed delivery program for the widebody 777X at the end of 2023. This is the third delay due to increased costs, certification requirements and falling demand for long-haul aircraft.

  • The company also wrote off $ 468 million due to production losses under the 737 Max program.

  • As a result, Boeing’s losses for the fourth quarter reached $ 8.4 billion, compared with losses of $ 1.01 billion in the fourth quarter of 2019.

  • Total revenue fell 15% to $ 15.30 billion, which was better than analysts’ estimates of $ 15.07 billion. Boeing’s quarterly revenue and earnings statistics for the last 2 years are available here.

  • Revenues for the worst-hit commercial aircraft division fell 37% to $ 4.73 billion as shipments fell 25% to 59 units in the quarter.

  • In significant positive news, Irish airline Ryanair ordered 75 737 Max aircraft in December, the largest order since the aircraft was shut down in 2019.

  • In addition, Alaskan Airlines signed an agreement to purchase 23 more 737 Max aircraft.

Boeing said Wednesday that it has delivered 40 737 Max aircraft to customers from its stock. Already, five air carriers have made commercial flights on the 737 Max, for the first time since long grounding.

On Wednesday, the European Union announced the lifting of the 737 MAX flight ban, followed by the United States, Canada and Brazil. The requirements for the resumption of flights included: software updates, electrical equipment, crew training and much more.

Boeing results for the year

The 2020 crisis saw Boeing’s annual commercial jet shipments fall to 157 units from 380 units. in 2019 and 806 units. in 2018. As a result, the American aerospace giant ceded world leadership to its French rival Airbus SE, which delivered 566 jets in 2020.

For the year, Boeing posted a loss of $ 11.94 billion on revenues of $ 58 billion for the year, with total sales falling 24%.

Orders for the distressed 737 Max dropped by more than 1,000 units in 2020, including cancellations of over 600 pre-orders and nearly 450 airline contracts.

Boeing’s forward-looking statements

Boeing expects to donate more 737 Max narrow-body aircraft to customers this year for contract settlement, which should improve the company’s cash balance and contribute to its financial recovery.

The company is currently working on an inventory of about 450 737 MAX aircraft.

At the same time, Boeing said it does not expect an increase in 737 Max production to 31 per month until early 2022, which is later than previously estimated.

At the same time, according to analysts, the restoration of supplies to the level of 2019 is expected no earlier than 2024.

By the end of 2021, Boeing plans to further cut its staff to 130,000 people. Earlier in December, the company said it would offer Boeing stock instead of a pay hike in 2021.

The company declined to provide financial projections for 2021.

In addition to concerns about the long-term containment of demand for international air travel due to the pandemic and the slow spread of COVID-19 vaccines, there are others.

For example, many analysts now believe that business travel will never return to pre-pandemic levels, as corporations have adapted to the virtual conference model that saves billions on travel budgets.

While macroeconomic conditions in 2021 will continue to constrain the airline industry, Boeing CEO Dave Calhoun said, “I’m sure 2020 is a rearview mirror,” saying the current crisis “does not cloud the outlook for the company’s future.”

Boeing has sufficient liquidity to cope with the crisis and meet its current obligations: total free cash flow for 2020 was negative $ 19.7 billion, at the same time, the company ended the fourth quarter with total cash and securities traded worth $ 25.6 billion.

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