Aerospace giant, Boeing, reported a second-quarter loss of $2.9 billion, its worst ever, topping a $1.6 billion setback during the financial crisis in 2009, as revenue tanked and costs jumped for the aircraft manufacturer.
This is as its flagship 737 Max jet remains grounded after two fatal crashes in five months.
Second-quarter figures of the Chicago-based plane manufacturer shows Boeing lost $5.82 a share with revenue plummeting to $15.8 billion. Free cash flow was negative at $1.01 billion, revenue from commercial aircraft unit tanked 66percent to $4.72 billion, defense and space revenue surged 8percent to $6.61 billion while global service revenue increased 11percent to $4.54 billion
Also during the period, it delivered 104 fewer airplanes to customers in the second quarter compared with last year, as deliveries of the company’s mass-produced 737 Max aircraft are halted, and recently took a charge of $4.9bn after the crashes.
In October, Lion Air Flight 610 crashed just minutes after taking off from Jakarta, Indonesia, killing 189 people on board. Also in March, another Boeing 737 Max, Ethiopian Airlines Flight 302, crashed minutes after take-off killing all 157 people on board.
Rating agencies Moody’s and Fitch earlier this week lowered the outlook on Boeing debt to “negative,” citing the MAX situation, which Fitch said would make Boeing’s reputational standing a “watch item for the next year or more”.
However, the rating agencies retained their investment-grade credit rating on Boeing debt, given the company’s liquidity, financial flexibility and dominant position in the market. Fitch has an ‘A’/’F1’ rating on Boeing debt, while Moody’s has an ‘A2’ rating.
Jonathan Root, Moody’s Senior Vice President, said the change in outlook to negative principally reflects the grounding of the company’s 737 MAX aircraft which will run longer than we had expected, which will compound its operational disruption, costs and the size of the investment in working capital as production remains at a substantial rate of 42 per month
According to Fitch, 737 MAX will remain a concern throughout the aviation credit sector into 2020, while the situation will reduce much of the financial cushion Boeing has at the current ‘A’ rating, leaving the company more exposed to other unforeseen events or industry developments
The grounding of the 737 MAX has sent shockwaves through the industry and pushed back the launch of a new Boeing aircraft. The company also faces numerous lawsuits filed by families of the victims of the two crashes.
The company announced plans to donate $100m to victims and communities affected by the crashes. It also could potentially face regulatory penalties, including from a criminal investigation by the US justice department.
OLUFIKAYO OWOEYE
