A Boeing 737 MAX sits outside the hangar during a media tour of the Boeing 737 MAX at the Boeing plant in Renton, Washington.
Matt Mills | Reuters
Boeing is set to detail another rough quarter before the market opens Wednesday.
Here’s what to watch for when Boeing reports:
Wall Street analysts polled by Refinitiv expect the aerospace giant to post a third-quarter loss of $2.47 per share, excluding one-time items, and revenue of $13.9 billion, a more than 30% drop from a year earlier.
Boeing’s stock price has shed more than 50% of its value this year, while the S&P 500 gained 5.3%, as the company struggled with the virus on top of the crisis following two fatal crashes of its best-selling 737 Max, the first of which occurred two years ago on Thursday.
Regulators appear to be edging closer to lifting their flight ban on the 737 Max, after several design changes. Boeing executives are likely to provide more detail about their expectations. In July, the company said it expected to have Federal Aviation Administration approvals that would let it resume deliveries of the planes to customers in the fourth quarter.
Even if the company gets FAA and other regulator approvals, passengers will still need to feel comfortable flying on the planes. American Airlines, which has scheduled the 737 Max for late December, is planning to let customers tour the 737 Max at several U.S. airports next and have its pilots answer their questions. United Airlines and Southwest Airlines meanwhile don’t expect to have the planes in their schedules until 2021.
The manufacturer has more than 400 Max planes that have been produced but not yet delivered to airlines.
The aerospace giant, its suppliers, customers and rivals are facing mounting and interconnected losses from the coronavirus pandemic’s toll on air travel demand.
Customers like airlines are desperate to save cash. With demand at less than half of 2019 levels some are canceling or deferring deliveries. In the first nine months of 2020, Boeing lost a net 381 orders for new planes, including both cancelations and conversions. The coronavirus could diminish industry demand for more aircraft for the next decade, according to Boeing’s own estimates.
Airlines and other customers pay the bulk of an aircraft’s price when it’s delivered, so the dulled appetite for new planes is particularly painful for Boeing right now.
“One of the key problems that Boeing faces because of the Max situation and compounded by the pandemic is that production and delivery are not aligned,” said Robert Spingarn, an aerospace and defense analyst at Credit Suisse. “Production uses cash and delivery harvests cash,” which results in very extreme swings in cash flows.
Boeing delivered 98 airplanes in the first nine months of the year, compared with 301 in the same period of 2019.
The outlook for Boeing, like other companies tied to travel, is heavily dependent on a successful coronavirus vaccine or treatment, analysts say. Until then, or until the FAA clears the Max for flight, things are murky.
“They’re in no-man’s land,” said Jeffries aerospace and defense analyst Sheila Kahyaoglu. “It’s all Max and virus dependent.”
Analysts expect Boeing to report negative free cash flow for a sixth consecutive quarter with estimates of about $5.4 billion, which is a slight improvement from negative $5.6 billion in the three months ended June. 30.
Liquidity isn’t expected to be an issue after Boeing’s massive $25 billion debt sale this summer.
Boeing in July announced it would cut production of its 787 widebody Dreamliner to six a month next year and slow its ramp up of 737 Max production.
It is also consolidating its 787 production at its non-union factory in North Charleston, South Carolina. The company executives will likely be asked whether there will be further reductions in production and in headcount. Boeing warned on the second-quarter call that it could further cut jobs, saying it shed some 19,000 workers this year.
American Airlines plans customer Boeing 737 Max tours and calls with pilots to build confidence in jet
American Airlines Boeing 737 MAX jets sit parked at a facility in Tulsa, Oklahoma, U.S., May 10, 2019.
The jets were grounded worldwide more than a year and a half ago after the two crashes — Lion Air Flight 610 in October 2018 and Ethiopian Airlines Flight 302 in March 2019. All 346 people on board the flights were killed.
Following repeated setbacks, the Federal Aviation Administration is at the tail-end of its recertification process for the jets though it has not signed off on the planes officially.
“The FAA continues to follow a thorough process, not a prescribed timeline, for returning the aircraft to service,” it said in a statement.
Boeing has made several changes to the planes’ software including making a flight-control system that pilots struggled against in both crashes less aggressive.
“We are seeing that finish line approach us and I think it’s a real finish line,” David Seymour, American Airlines’ chief operating officer, told employees in a town hall meeting last week, which was reviewed by CNBC.
The Fort Worth-based airline is planning to start flights with employees after Thanksgiving, estimating the FAA will lift the flight ban in mid-November, Seymour said. An American Airlines spokesman said the company’s plans are tentative, based on the FAA’s decision.
American last week said it scheduled what it expects will be the first 737 Max flights since the jet’s grounding for some flights between New York’s LaGuardia Airport and its Miami hub starting Dec. 29 through Jan. 4.
American is planning offer some customers a chance after Thanksgiving to see the aircraft in person at airports, including Dallas/Fort Worth International Airport, LaGuardia and Miami, with the participation of pilots and mechanics. Pilots can also answer customer questions through calls and video messages, the company said.
“They’re the ones that … really have the credibility to explain the Max,” said Alison Taylor, American’s chief customer officer in the employee town hall.
The plane’s grounding plunged Boeing into its biggest-ever crisis, which was later compounded by the coronavirus pandemic’s toll on air travel.
U.S. airlines alone lost more than $10 billion in the third quarter and carriers around the world have cancelled hundreds of 737 Max planes. American, which had 24 737 Max planes in its fleet at the time of the March 2019 grounding, will defer orders of 18 others to as late as 2024.
United Airlines‘ chief commercial officer Andrew Nocella said earlier this month in an earnings call the airline will put the planes back on its schedule “likely sometime next year based on the schedule we hear from the FAA and Boeing.”
Southwest Airlines CEO Gary Kelly last week told CNBC that the airline hasn’t scheduled any new Max flights because it still hasn’t been cleared to fly. Kelly estimated it could return in the second quarter of 2021, however.
Boeing is scheduled to report third-quarter results before the market opens on Wednesday, when it will detail the financial impact of Covid-19 on aircraft demand and the latest steps in getting the Max flying again.