Q3 Earnings Of Boeing Lower Than Market Expectations But Firm Backs 737 Max Return

While the revenues for the United States based aircraft maker Boeing beat market estimates, its earnings were lower than what the market was expecting for the third quarter of the year. There was however an increase in the value of the shares of the company following positive messaging about the possibility of the return of its grounded 737 Max planes into the air.

Boeing reported earnings per share of $1.45 on revenue of $19.98 billion for the quarter.

While there has so far been no signaling by the US and other air regulators authorities about the return of its 737 Max planes in the air, the company is still confident that will happen in the fourth quarter of the year. Consequently the company will be able to ramp up production of the planes from the current 42 units per month to 57 per month by late 2020.

Boeing reported a drop of 41 per cent in revenues generated from its commercial aircraft division at $8.25 billion. The company had announced earlier that there would be a 63 per cent year on year drop in the deliveries for the third quarter at just 63 aircraft. There was also an increase by $0.9 billion in the costs for production of Boeing 737s which reflected the confidence of the company about the return of the planes into service.

The “global trade environment” was cited by the company to justify its decision to reduce the rate of production of its 787 planes to just 12 every month for the next two years starting in late 2020. On the other hand, a possible time of early 2021 is being expected by the company for the delivery of the first 777X planes even though the Emirates Airlines has recently said that it does not expect to get the first 777X delivered by Boeing before “April or the second quarter” of 2021.

And even though Boeing is very confident that US air regulatory authority will allow its 737 Max planes to fly again in the fourth quarter, a number of airlines such as Southwest Airlines, United Airlines and American Airlines have already said that they expect permission to fly the 737s only by early 2020.

Warning of a complete production stop was given by Boeing CEO Dennis Muilenburg during a conference call while announcing its second quarter results. But on Tuesday, United Technologies said it expected Boeing to maintain its current production of 42 737 Max per month for the rest of the year.

Analysts are expecting an increase in the costs for the ongoing Boeing 737 Max grounding. In the last quarter, a $4.9 billion after-tax charge ($5.6 billion pretax) over the jet was reported by Boeing. An estimate of $3.2 billion in additional charges over the next four months was predicted by Credit Suisse on Monday.

With respect to the recently leaked warning messages from a Boeing pilot about the automated system in the 737 Max planes that are believed to be behind to recent fatal crashes that killed 346 people, Boeing said that it was unfortunate the messages “could not be released in a manner that would have allowed for meaningful explanation.”

(Adapted from Investors.com)

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