The Boeing (NYSE: BA) 737 Max crisis, which began nearly a year ago, is seeing new developments that could spell continued pain for the aerospace giant. The plane has been grounded across the globe after 2 fatal crashes early last year. First, on Thursday, Reuters obtained a cache of internal emails from Boeing employees that sheds a negative light on the corporate culture. The hundreds of internal messages show Boeing's attempts to evade regulatory scrutiny during the development process of the 737 Max, as well as employees mocking the aircraft, aviation regulators, and the firm. One email noted the Federal Aviation Administration (FAA) was not thorough or demanding enough with its review of the jet, and another blamed the broken company culture of choosing the lowest cost suppliers. Then on Friday, the FAA proposed a fine of $5.4 million for Boeing for faulty wing parts on dozens of 737 Max planes. The agency's planned fine does not relate to the problematic flight control software that was implicated in the 2 deadly crashes.
Then on Tuesday morning, American Airlines (NASDAQ: AAL) announced it is delaying the Boeing 737 Max from its schedules until early June as the date of the troubled plane's return to service becomes more uncertain. American has taken the 737 Max off its schedules through June 3, more than a full year later than it first expected. Boeing recently added a requirement of time-consuming simulator training for pilots before they can resume flying the aircraft. It is becoming increasingly unclear when the planes will be able to fly again, after Boeing said it plans to temporarily shut down production of the planes this month while it tries to assuage regulators on new fixes. American Airlines believes the grounding already cost it $540 million in pretax income last year, and other airlines also estimated similar losses.
Boeing took a $4.9 billion charge for the 737 Max crisis last July, but it is still feeling the negative impact. On Tuesday Boeing reported its worst annual net orders in decades, along with its lowest numbers for plane deliveries in 11 years, making it fall behind main French competitor Airbus Group (OTC: EADSY). Boeing revealed gross orders cratered 77% to 246 in 2019, while net orders after cancellations or conversions plunged from 893 a year ago to just 54 airplanes. Total deliveries fell by 53% to 380 planes over the whole of last year, as the Max's grounding made it impossible to deliver the aircraft. After an accounting adjustment representing jets ordered in previous years but now unlikely to be delivered, Boeing reported its net total orders this year tumbled to a negative 87 airplanes, far worse than Airbus' 768 orders. Boeing's ongoing crisis, coupled with regulatory uncertainty, are the main reasons why Wall Street analysts and investors are worried about the firm's fiscal 2020 earnings results going forward.
The author does not hold any positions in any of the securities above.