Boeing Reveals Financial Damage From Grounding Of 737 Max Planes

Jul 24, 2019
Originally published on July 24, 2019 7:53 am

NOEL KING, HOST:

We have news this morning about the financial hit that Boeing has taken because of its 737 Max planes. The company, you might remember, had to ground those planes earlier this year after two crashes, one in Ethiopia and one in Indonesia. Three hundred and forty-six people died in those crashes. Now this morning Boeing has issued its financial results for April, May and June, and NPR's Jim Zarroli was paying attention.

Good morning, Jim.

JIM ZARROLI, BYLINE: Good morning.

KING: So what did Boeing say has happened to it over the past couple of months?

ZARROLI: Well, we knew from Boeing, it had already warned last week, that it lost a lot of money during the second quarter. It just confirmed that this morning. Its revenues are down 35% from the same time last year. It also said its revenue forecasts are likely to change because of uncertainty about the 737 Max. Company had previously said it expects the plane to return to service by the end of this year. It has had some trouble getting these planes clearance to fly. So Boeing said today it's working with regulators to determine when the plane can fly again. When it knows more, it will come back and provide new guidance about how much it hopes to make.

KING: And Jim, put this in context for us. Why is the grounding of this particular plane such a big problem for Boeing?

ZARROLI: Well, because 737 Max is Boeing's bestselling aircraft. So it has taken a big financial hit. It's delivered fewer than half as many planes to airlines as it did last year. It has to compensate airlines when they can't fly the planes. Then there's the cost from all the lawsuits it faces. So this has been a real setback for the company, and it's not over.

KING: Big setback for Boeing, but what about the airlines?

ZARROLI: Yeah. Big problem for them, too. The airlines all over the world have had to cut flights, rearrange schedules. American Airlines said this month it had to cancel 7,800 flights during April, May and June. Ryanair, which is a big budget airline in Europe, had really big expansion plans for next year. Now it's having to scale back those planes, reduce the number of cities it flies to. So you can imagine, these airlines aren't really happy. The big danger for Boeing is that some of these airlines could begin to take their business elsewhere, especially to Airbus. And if they take too long getting the planes back in the air, really has to regain credibility. And not just with the airlines, but with the flying public, too.

KING: Jim, is Boeing a big enough company for its problems to impact the U.S. economy as a whole?

ZARROLI: Yeah. I mean, remember, Boeing is just one manufacturer, but it buys a lot of products from other companies, like engines from GE or, you know, it hires engineering companies, and metal fabricators and all kinds of companies, all kinds of contractors. Its tentacles reach really far into the U.S. economy. I spoke to Greg Daco, who is the chief U.S. economist at Oxford Economics. He says there's already evidence that Boeing's troubles are affecting the economy as a whole.

GREG DACO: We're already seeing some signs of slowing momentum in the U.S. economy and slowing business investment overall. And this latest saga pertaining to the 737 Max is likely to continue to weigh on business investment.

ZARROLI: Daco has said he's calculated that Boeing's troubles probably shaved about a tenth of a percentage point off of U.S. growth during the second quarter. Economy's already slowing down. Boeing's troubles are just going to make it slow a little bit more.

KING: NPR's Jim Zarroli in New York. Thanks, Jim.

ZARROLI: You're welcome. Transcript provided by NPR, Copyright NPR.