Facing back-to-back crises, Boeing posts a record loss
Updated 1812 GMT (0212 HKT)
January 27, 2021
New
York (CNN Business)Boeing closed the books on its worst year ever, posting record
losses and plunging sales on the backs of combined crises: the Covid-19
pandemic and the problems getting the 737 Max back in the air.
The
company's loss from operations climbed to $12.8 billion, up from nearly $2
billion a year ago, which was Boeing's previous record loss. The company's net
loss soared to $11.9 billion, also an increase from the previous year's record
of $636 million.
The net
loss is so much larger partlybecause of the decision announced Wednesday to
push the first delivery of its newest jet, the 777X, back to 2023, from its
previous target of a 2022 launch. The widebody long-range plane was designed to
be used mostly on international travel, and that is the part of air travel that
is expected to take the longest time to recover from the pandemic. Boeing took
at $6.5 billion charge as a result of that delay.
Shares of Boeing (BA) fell 3% in
midday trading on the much larger than expected loss.
The
company was hammered by a near halt in air travel caused by the
pandemic, which caused airlines around the globe to cancel or postpone orders and scheduled
deliveries of new planes. Revenue plunged 24% to $58.2 billion for the year.
CEO's
outlook
"2020
was a historically challenging year for our world, for our industry, for our
business and our communities," said CEO Dave Calhoun. And he warned that
recovery in the airline sector is not imminent, saying "the next six to
nine months will remain very challenging for our airline customers and the
entire industry."
He noted
Covid-19 infection rates remain high in many areas and travel restrictions are
still in place.
"We
expect it will take around three years for travel to return to the 2019 levels
and a few years beyond that to return to our long-term growth trends,"
Calhoun said.
Currently,
the number of planes in the air is down about 25% from pre-pandemic levels, he
added. But The good news for aircraft makers is that about 1,400 planes that
were parked have been permanently retired -- so they will be replaced by new
planes when demand returns, as airlines phase in newer, more fuel-efficient
models.
But with
international travel likely to stay depressed for at least the next couple of
years, demand for widebody planes will be hurt. Boeing is the market leader in
that sector. The soft international travel outlook is one of the reasons the
company pushed the debut of its 777X to the end of 2023.
Boeing is
also struggling to resume deliveries of the 787 Dreamliner at the end of the
first quarter. The 787 is another widebody design what is suffering from recent production issues. Calhoun said
Wednesday that Boeing will deliver few, if any, 787s in February.
Contrast
that with 2018, when Boeing reported record earnings as well as record revenue that
topped $100 billion for the first time. But in March 2019, its best-selling
plane, the 737 Max, was grounded following two fatal crashes that killed 346 people.
It took until November 2020 for the plane to win approval to fly passengers again, far
longer than original estimates, and the company hemorrhaged money since then.
While the
US Federal Aviation Administration approved the plane to fly in November, other
regulators around the world, including China, have yet to clear it to carry
passengers. European regulators approved the plane on Wednesday. Boeing has
reported costs of more than $20 billion associated
with the 737 Max crisis.
But the
real blow to Boeing results came from the huge losses in the airline industry
caused by the pandemic. It recorded a record 655 canceled orders for its planes
during 2020, and only delivered 157 planes during the course of the year, down
from 380 it had delivered in 2019, and 806 it had delivered in 2018 before the
737 Max crisis. And with the continued problems in the airline industry it will
take sometime for Boeing to get deliveries and revenue back on track.
Boeing agrees to pay $2.5 billion to settle charges it
defrauded FAA on 737 Max
Analysts
forecast that Boeing revenue will climb back to $78 billion in 2021, helped by
the deliveries of about half of the more than 400 737 Max jets it built during the grounding but was unable
to deliver. That could lift Boeing back into modest profitability by the middle
of the year.
But the
company will be a smaller company than it was before the crises.
It has
announced it expects to reduce staff to 130,000 by the end of
2021, down from 161,000 on staff at the start of 2020. About 19,000 of those
jobs had been eliminated in the first nine months of 2020 through a combination
of buyouts and involuntary layoffs. It will end production of the 747 in 2022, and
halt production of the 787 Dreamliner in Washington state in 2021 as it
consolidates production at a plant in South Carolina.
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