Boeing Profit Slumps 53 Percent as MAX Crisis Deepens

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  • An aerial photo shows Boeing 737 MAX airplanes parked on the tarmac at the Boeing Factory in Renton, Washington, U.S. March 21, 2019. Boeing Co said on Wednesday it had reprogrammed software on its 737 MAX to prevent erroneous data from triggering an anti-stall system that is facing mounting scrutiny in the wake of two deadly nose-down crashes in the past five months. REUTERS/Lindsey Wasson/File Photo

    An aerial photo shows Boeing 737 MAX airplanes parked on the tarmac at the Boeing Factory in Renton, Washington, U.S. March 21, 2019. Boeing Co said on Wednesday it had reprogrammed software on its 737 MAX to prevent erroneous data from triggering an anti-stall system that is facing mounting scrutiny in the wake of two deadly nose-down crashes in the past five months. REUTERS/Lindsey Wasson/File Photo

    TEMPO.CO, Jakarta - Boeing Co cut production of its flagship Dreamliner and delayed the arrival of a successor to its 777 mini-jumbo, piling new pressures on a rejigged senior management team on Wednesday as the continued safety grounding of its 737 MAX sliced third-quarter profits.

    The world's largest planemaker also said it was delaying plans to step up production on its money-spinning 737 line in the Seattle area, and would not hit a record-level 57 aircraft monthly until late 2020, months later than previously planned.

    Despite the trio of industrial setbacks, Boeing shares were up 2.6% in morning trading as its steady estimate of a 737 MAX return in the fourth quarter appeared to be eclipsing the downside of the 787 production cut and other problems, an analyst said.

    "The 787 cut appears to be mostly tied to China trade negotiations, which at least have the potential to improve over the next 12-months," said Seaport Global analyst Josh Sullivan.

    The profit slump and fresh setbacks capped a tumultuous week for the world's largest planemaker, already in the eighth month of a deepening crisis over the grounding of its best-selling single-aisle following deadly crashes.

    On Tuesday, the company ousted the top executive of its crucial commercial airplanes division, Kevin McAllister, in an unexpected management shakeup related to the MAX crisis that senior industry sources say puts Chief Executive Dennis Muilenburg squarely in the firing line in the event of further revelations or if the company fails to recover from the MAX crisis.

    Muilenburg's title of board chairman was stripped earlier this month.

    Muilenburg told analysts on a conference call that Boeing may consider cutting or halting 737 production if return-to-service assumptions change.

    Muilenburg also expressed regret over instant messages, first published by Reuters on Friday, in which a former Boeing pilot describes erratic simulator behavior of software now linked to both crashes. The 2016 messages were sent months before the aircraft entered service.

    Boeing has begun taking steps to increase safety oversight in its industrial operations and at the board level, he added.

    Its timeline of a fourth-quarter MAX return compares to a January target from European regulators, while major U.S. carriers United, Southwest, and American were all scheduling without the MAX until next year.

    Boeing also said there was "no significant change" to estimated payments to airline customers related to the 737 MAX grounding, part of the $8 billion price tag Boeing has estimated for the MAX crisis.

    On Wednesday, the U.S. manufacturer reported a 53% drop in quarterly profit and had a negative free cash flow of $2.89 billion in the quarter, compared with a positive free cash flow of $4.10 billion a year earlier.

    Core operating earnings fell to $895 million or $1.45 per share, from $1.89 billion or $3.58 per share, a year earlier.

    REUTERS