Boeing announced Wednesday that it posted a $355 million loss due to lower revenue in the first quarter. It's another sign of the crisis gripping aircraft manufacturers, which face intense scrutiny over aircraft safety and a growing number of whistleblower accusations of sloppy work.
CEO David Calhoun said the company is going through a “tough time” and is focused on resolving manufacturing issues rather than performance.
Ever since the door plug of a Boeing 737 Max popped off during an Alaska Airlines flight in January, leaving a gaping hole in the plane, company executives have been forced to talk about safety rather than finances.
The crash halted Boeing's progress, which appeared to be recovering from two fatal Max crashes in 2018 and 2019. The crashes in Indonesia and Ethiopia that killed 346 people are now back in the spotlight.
On Wednesday, about six relatives of the passengers killed in the second crash met with government officials in Washington. They asked authorities to determine that Boeing violated the terms of the 2021 settlement and reinstate criminal fraud charges against the company.
Boeing officials did not discuss the meeting, but they met repeatedly to discuss quarterly earnings from a new focus on safety.
“As we report our first quarter financial results today, we remain focused on the drastic actions we are taking in response to the Alaska Airlines Flight 1282 incident,” Calhoun told employees in a memo Wednesday. ” he said.
He listed a series of measures the company is taking and reported “significant progress” in improving manufacturing quality. Much of that is due to a slowdown in production, which means fewer planes for airline customers. Calhoun told CNBC that thorough inspections by major supplier Spirit AeroSystems have reduced defects in the aircraft by 80%.
“We certainly face tough times in the near future,” he wrote to employees. “Shortening delivery times can be difficult for customers and financially. But safety and quality must come first.”
Mr. Calhoun, who will retire at the end of this year, reiterated that he has full confidence that the company will recover.
Mr. Calhoun took over as CEO in early 2020 as Boeing struggled to recover from the Max crashes and regulators grounded the planes around the world for nearly two years. The company believed it had avoided the risk of criminal prosecution after the Justice Department agreed not to try the company on fraud charges for three years (ending in January) if it complied with U.S. anti-fraud laws. was.
Boeing has reached a confidential settlement with the families of the passengers who died in the Ethiopian crash, but the families of those killed in the Ethiopian crash continue to pressure the Justice Department to prosecute the company. On Wednesday, department officials told relatives the agency was still reviewing the matter.
It was a touching encounter, said Nadia Milleron, who lost her daughter Samiya Sumo in the 2019 accident.
“People are angry. People are screaming. People are starting to worry about other people,” said Milleron, who watched online from her home in Massachusetts while her husband attended in person. Her relatives believe the Justice Department is “missing vast amounts of evidence against Boeing.” It's mysterious,” she said.
Milleron said Glenn Leon, head of the Justice Department's criminal division's fraud division, will decide whether the Justice Department will extend its review beyond this summer or pursue a trial against Boeing on charges of defrauding the regulators that approved the Max. He reportedly said that he may ask the Justice Department for questioning. The judge dismisses the charges. She said Leon made no promises.
The Justice Department declined to comment.
A federal judge and an appeals court ruled last year that they did not have the authority to overturn the Boeing settlement. Families of crash victims hope the government will reconsider charges against Boeing after a door plug exploded on an Alaska Airlines jetliner flying over Oregon on January 5. was.
Investigators looking into the Alaska flight said the bolt that holds the door plug in place was missing after repair work at a Boeing factory. The FBI advised the passengers that they may be victims of a crime.
Boeing's stock price has fallen by about a third since the crash. The Federal Aviation Administration has stepped up its oversight and given Boeing until late May to develop a plan to resolve manufacturing issues with the 737 MAX. Airline customers are frustrated that all the new planes they ordered are not arriving due to shipping disruptions.
Several former managers and one current manager reported various problems in the production of Boeing 737 and 787 jetliners. More recently, a quality engineer told Congress last week that Boeing was cutting corners in manufacturing that could ultimately cause the 787 Dreamliner to disintegrate. Boeing aggressively pushed back against his claims.
But Boeing has some advantages.
Boeing, along with Airbus, forms one half of a duopoly that controls the production of large passenger planes. Both companies have years of backlogs of orders from airlines seeking new, more fuel-efficient aircraft. And Boeing is a major defense contractor for the Department of Defense and governments around the world.
Richard Aboulafia, a longtime industry analyst and consultant at Aerodynamic Advisory, said that despite all the setbacks, Boeing still has a strong combination of products, technology and talent that are in high demand.
“Even if you're No. 2 and you're in big trouble, you're still in a very strong market, and it's an industry with very high barriers to entry,” he said.
And despite massive losses of about $24 billion over the past five years, Aboulafia said the company is in no danger of going bankrupt.
“This is not General Motors in 2008 or Lockheed in 1971,” Aboulafia said, referring to two iconic companies that required massive government bailouts and loan guarantees to survive.
All of these factors explain why 20 analysts surveyed by FactSet rate Boeing stock a “buy” or “overweight,” while only two rate it a “sell.” useful for. (Five are “pending” ratings.)
Boeing said its first-quarter loss excluding special items was $1.13 per share, better than the $1.63 per share loss that analysts had expected, according to FactSet research.
Sales decreased 7.5% to $16.57 billion.
The company's shares fell 1% in afternoon trading.
