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B10 | REPORTONBUSINESS O THEGLOBEANDMAIL| THURSDAY,OCTOBER24,2019
Boeing Co.said Wednesday it still
expects U.S. regulatory approval
for its grounded 737 Max in the
fourth quarter, sending its shares
higher despite a slump in quarter-
ly profit.
The world’s largest plane mak-
er also said it was cutting produc-
tion of its flagship Dreamliner, de-
laying plans to step up output of
its money-spinning 737 line, and
also delaying the arrival of a suc-
cessor to its 777 mini-jumbo.
These fresh industrial setbacks
heaped pressure on a newly re-
jigged senior management team
fighting to repair trust with airline
customers and passengers shak-
en by an eight-month safety ban
on its 737 Max after two deadly
crashes.
Boeing did not take fresh
charges on top of the estimated
US$8-billion price tag for the Max
crisis, but warned of pressure on
its cash flow until deliveries and
production resume at normal lev-
els.
On Wednesday, the U.S. manu-
facturer reported a 53-per-cent
drop in quarterly profit and had a
negative free cash flow of
US$2.89-billion in the quarter,
compared with a positive free
cash flow of US$4.1-billion a year
earlier. Core operating earnings
fell to US$895-million or US$1.45 a
share, from US$1.89-billion, or
US$3.58 a share, a year earlier.
The plane maker separately
faces a slew of investigations by
regulators, U.S. Congress and the
Department of Justice over its de-
velopment of the 737 Max, its pre-
viously bestselling workhorse for
short-haul travel.
“The 787 cut appears to be
mostly tied to China trade nego-
tiations, which at least have the
potential to improve over the
next 12-months,” Seaport Global
analyst Josh Sullivan said.
On Tuesday, the company oust-
ed the top executive of its crucial
commercial airplanes division,
Kevin McAllister, in an unexpect-
ed management shakeup related
to the Max crisis that senior in-
dustry sources say puts chief ex-
ecutive Dennis Muilenburg
squarely in the firing line in the
event of further revelations, or if
the company fails to recover from
the Max crisis.
Mr. Muilenburg, stripped of his
board chairman title earlier this
month, is set to testify before U.S.
lawmakers over two days in
Washington next week.
“I anticipate there will be tough
questions, challenging questions,
a lot of scrutiny,” he told analysts
and journalists on a conference
call. “And frankly, we support the
scrutiny on the work that we’re
doing.”
Earlier in the call, Mt. Muilen-
burg expressed regret over in-
stant messages, first published byReuters on Friday, in which a for-
mer Boeing pilot describes erratic
simulator behaviour of software
now linked to both crashes.
The 2016 messages, sent
months before the aircraft en-
tered service, plunged Boeing in-
to a media firestorm and erased
about US$14-billion of its market
value as the FAA and lawmakers
demanded explanations on their
content and delayed release.
Boeing’s timeline of a fourth-
quarter Max return compares
with a January target from Eu-
ropean regulators, while major
U.S. carriers United, Southwest
and American were all drawing
up schedules without the Max un-
til next year.
Asked about potential delays
from overseas regulators, which
also must approve the Max’s re-
turn, Mr. Muilenburg said, “it
could well be that approvals will
vary by jurisdiction.”
“And again, the regulators will
make that decision. Ultimately, it
will be their timeline,” he said.Mr. Muilenburg said the com-
pany was making “daily” progress
on testing the final software fix for
the 737 Max and developing relat-
ed training materials, although
the FAA said Tuesday it would
need at least several more weeks
for review.
The company could consider
cutting or halting 737 production
if regulatory approvals are further
delayed, Mr. Muilenburg said, al-
though there was no immediate
announcement of job cuts.
The Max crisis, which has con-
sumed the company, has eclipsed
work on a potential new mid-
market airplane code-named
NMA, and other industrial set-
backs broadened pressure on the
company’s new commercial lead-
ership.
On Tuesday, Boeing named vet-
eran executive Stan Deal, who
had been running its two-year-
old Global Services Division, to
the top job at commercial air-
planes.
Mr. Deal’s challenge is to get theMax back into service globally
while simultaneously handling
new aircraft deliveries and boost-
ing 737 production. That’s seen as
one of the most formidable logis-
tical challenges in the industry’s
history.
After the 737 Max safety ban in
March, Boeing cut 737 monthly
production from 52 aircraft to 42
and halted deliveries, cutting off a
key source of cash and hitting
margins.
Boeing’s previous schedule to
hit a record manufacturing rate of
57 single-aisle jets a month by
June, 2020, after incrementally re-
turning to precrash levels, was
now delayed until late 2020, the
company said.
Mr. Muilenburg also said Gen-
eral Electric was making “good
progress” addressing problems
with its GE9X engine for the 777X
twin-aisle, and the aircraft was
still on track for a first flight in
early 2020.
But Boeing was now targeting
early 2021 for the first delivery of
the 777X, and sees three total 777-
program deliveries a month in
2020, verses 3.5 a month in 2019,
Mr. Muilenburg said.
With the 777-8 and 777-9, Boe-
ing aims to maintain its grip on
the ‘mini-jumbo’ market by leap-
frogging rival Airbus’s 365-seat
A350-1000 and scooping up fresh
orders following the demise of
the A380 superjumbo.
Citing global trade tensions
and a lack of orders from China,
the United States’ largest exporter
was also reducing the 787 Dream-
liner production rate to 12 air-
planes a month for approximate-
ly two years beginning in late
2020.
Boeing faced additional uncer-
tainty over future production
rates for its Dreamliner earlier this
month from lost business, theo-
retically putting a hole in produc-
tion after Boeing increased its
build rate to 14 aircraft a month,
from 12, at twin U.S. factories.REUTERSBOEING(BA)
CLOSE: US$340.50, UP US$3.50BoeingstillpredictingU.S.approvalof737Maxin2019
Sharesofplanemaker
rise,evenasitreports
a53-per-centdrop
inquarterlyprofit
ANKITAJMERA
ERICJOHNSON
Boeing737MaxplanesareseengroundedatWashingtonState’sGrantCountyInternationalAirporton
Wednesday.Theplanemakerhaswarnedofcontinuingpressureonitscashflowuntilproductionresumes
atnormallevels.DAVIDRYDER/GETTYIMAGES