The worldwide grounding of the 737 MAX quickly rippled through Boeing's finances, depleting its cash reserve by nearly $1 billion in just the first three weeks, according to the company's first-quarter report.
In the midst of a crisis precipitated by the deaths of 346 passengers in two recent crashes of new 737 MAXs, Boeing on Wednesday outlined the immediate financial hit to its business.
Following the crash of an Ethiopian Airlines jet on March 10, the company ended that month with $0.9 billion less in available cash than it had as the year began. The commercial airplane unit took in $1.1 billion less revenue than it did in the same quarter a year earlier.
With the MAX grounding coming near the end of the quarter, the financial impact was relatively small. Next quarter will see a bigger hit.
With no clear timeline for the grounding to be lifted, Boeing withdrew its previous financial guidance for 2019. "Due to the uncertainty of the timing and conditions surrounding return to service of the 737 MAX fleet, new guidance will be issued at a future date," Boeing said.
Getting the plane back in the air is Boeing Chairman and Chief Executive Dennis Muilenburg's top priority.
"Across the company, we are focused on safety, returning the 737 MAX to service, and earning and re-earning the trust and confidence of customers, regulators and the flying public," he said in a statement.
He added that Boeing is making "steady progress on the path to final certification for a software update for the 737 MAX," which is essentially a redesign of a new flight control system on the MAX that activated erroneously in the minutes before each of the crashes.
Muilenburg said more than 135 test and production flights of the software update have been completed and Boeing is working with aviation regulators around the world to test the software and finalize the required pilot training that will be needed.
Strong performance in Boeing's defense and services businesses during the first quarter compensated somewhat for the financial hit to the commercial airplane unit.
Boeing's profit margin in the commercial airplane unit dropped from 15.6 percent of revenue in the final quarter of 2018 to just 9.9 percent last quarter, compared to 12.8 percent in defense and space and 14.1 percent in aftermarket services.
Boeing made a profit for the quarter of $2.35 billion, which is 18 percent lower than a year earlier. That met the latest expectations of Wall Street analysts, which were substantially reduced following the MAX grounding.
Earnings per share were $3.75, down 10 percent from a year earlier.
Free cash flow _ the key quarterly financial metric that investors focus on, which is the company's cash receipts minus its cash operating expenses and its investments in plant and equipment _ was down $455 million compared to the same quarter a year earlier.
As a measure of its operational performance Boeing cites its "core earnings," meaning profits excluding certain pension items. By this measure, core profits for the quarter were $2 billion, down 21 percent from a year ago, and core earnings per share were $3.16, down 13 percent from a year ago.
Muilenburg said that even as Boeing works its way through "this challenging time ... our attention remains on driving excellence in quality and performance and running a healthy sustained growth business built on strong, long-term fundamentals."
During the quarter, Boeing bought back $2.3 billion of its own shares to boost the stock price, all of those purchased prior to the MAX grounding. With cash draining, it's likely Boeing will suspend further stock buybacks until the flow of 737 deliveries resumes.
