Boeing CEO Dennis Muilenburg warned investors Wednesday that the company might need to further slow or temporarily halt its 737 Max production, CNN reported.
Boeing has continued to build the 737 Max, its bestselling jet, though the plane has been grounded since mid-March because of two fatal crashes that killed more than 300 people.
The aircraft manufacturing giant hopes to get approval for the plane to fly again sometime early in the fourth quarter, but Muilenburg said any further delays in approval could jeopardize its production.
A further slowdown or temporary shutdown of 737 Max production is “not something we want to do, but an alternative that we have to prepare for,” Muilenburg told investors on a conference call. He said the company needs to prepare for that “to make sure we’ve covered all scenarios.”
Boeing is still working on a software fix to a safety system which is believed to have caused the two crashes. But it says it won’t be able to present that fix to aviation authorities until September at the earliest, and it hopes to have a certification flight in October, the CNN report said.
After the certification flight, Muilenburg said he believes regulators will approve the 737 Max for flight in a matter of weeks. So it’s possible the plane won’t be cleared to fly again until at least late this year, or possibly next year.
Because of the grounding, Boeing reported its largest loss ever — a US$3.7 billion adjusted loss in the second quarter. The slower pace of 737 Max production has already increased Boeing’s production costs by about US$1.7 billion.
The company had already warned investors that it would take a US$5 billion profit hit from its inability to deliver the 737 Max to its customers, the CNN report said.
Boeing’s US$3.7 billion adjusted loss compares to a US$2.4 billion profit Boeing earned last year. Boeing’s results did not include a cost of litigation related to the two crashes.
The company announced it will set up a fund to distribute US$100 million to the families of victims. But it also said it took a US$201 million hit to profit last quarter primarily for a litigation reserve.
The company was helped by better results from its defense and services business.
Earnings from defense, space and security business more than doubled, increasing US$600 million. Its commercial aircraft unit reported a US$4.9 billion loss as revenue plunged by US$9.2 billion.
In addition to the 737 Max issues, the company also warned that it may not be able to deliver its newest aircraft, the 777X, by the end of next year, as it had hoped. Previously disclosed problems with the jet’s General Electric engine means that target for the first delivery is at “significant risk.”
Boeing also burned through about US$1 billion in cash in the quarter. But Boeing said it had nearly US$10 billion in cash and securities on hand to help it weather continued losses. It was able to issue new debt during the quarter to help increase its cash reserves, the CNN report said.