Even with the 737 MAX crisis mostly out of the way, Boeing may struggle to gain altitude.
The troubled U.S. plane maker’s shares have fallen a lot since the onset of the pandemic, but hardly more than those of key rival Airbus. This suggests that investors don’t see Boeing’s disadvantage extending much beyond the grounding of the MAX, the impact of which was baked into its stock price before the outbreak. It is a risky assumption.
Fourth-quarter earnings show why the gulf between the companies could in fact get larger—despite a return to service of the MAX, which was cleared to fly by European regulators Wednesday.
On Wednesday, the Chicago-based plane maker reported its biggest ever annual loss. Investors broadly expected it, but were still disappointed by the final tally: Losses for the fourth quarter of 2020 came in at $8.4 billion, compared with analysts’ expectations of about $500 million.
This was in part the result of a $6.5 billion pretax charge Boeing took on its 777X wide-body plane program. The company has now pushed its first delivery all the way back to 2023—making it three years late. The 777X has been affected by the pandemic, but also the assumption that regulators will take much longer to certify new jets after the MAX fiasco.
At the same time, the big moneymaker among Boeing’s long-range jets, the 787 Dreamliner, has been plagued by quality issues, with some planes being removed from service due to production flaws. Chief Executive David Calhoun said in a memo Wednesday that “comprehensive production inspections” were launched during the quarter, delaying deliveries and hitting commercial-aviation revenues.
And, of course, Boeing still has to unload the hundreds of MAX jets it has in storage. So far, about 40 of them have been delivered, which isn’t bad. Still, selling them without excessively depressing sale prices will prove challenging. Restarting production has come with additional costs, Boeing said.
Optimists in the investment community may interpret the company’s latest results as an attempt to get all the bad news out of the door, given that 2020 was always going to be the worst year ever for the aviation industry.
“They might say it was the kitchen-sink quarter the stock needed, helping to set up a cleaner story of more consistent improvement from here,” Credit Suisse analyst Robert Spingarn told clients following the earnings release.
But it is hard to believe that the problems that have crept up on the company over the past decade or more will be easy for Mr. Calhoun to fix. For one, he said that 787 deliveries, which were halted in October, won’t resume until late this quarter. Boeing’s greatest advantage over its European rival in civil aviation used to be the breadth of its catalog. Now all its key products are in some way tarnished, and it has little chance of catching up with Airbus in the promising market for medium-haul flights.
Despite a fall in Boeing’s share price Wednesday, markets have yet to fully come to terms with the ugly reality. Even with the MAX flying again and vaccination campaigns gathering speed, Boeing may not get the clean break it is hoping for.
This story has been published from a wire agency feed without modifications to the text.