BA Boeing Co

By Doug Cameron and Andrew Tangel 

Boeing Co. reported its first annual loss in more than two decades and said the costs from the 737 MAX crisis have climbed above $19 billion.

The MAX has been grounded world-wide since last March following a pair of plane crashes within five months of each other that killed 346 people. The crashes have drawn intense scrutiny of the plane maker's engineering, damaged the company's relationships with suppliers and customers, and led to the ouster of its chief executive last month.

Wednesday, Boeing booked another $9.2 billion in charges and associated costs in the fourth quarter to cover potential compensation to MAX customers as well as higher expenses from reducing and then halting production of the jetliner in January.

Underlining the mounting challenges facing new CEO David Calhoun and his team, the Chicago-based company also said it would make another cut in 787 Dreamliner production next year and booked more charges on its military tanker and space-taxi programs.

The company's latest financial report comes just days after Mr. Calhoun took over as CEO on Jan. 13. Last week, he signaled a back-to-basics approach early in his tenure, saying he would focus on rebuilding trust, boosting transparency and shoring up engineering and safety.

Mr. Calhoun said last week that he was confident the MAX will re-enter service despite repeated delays in winning regulatory approval, but the biggest crisis in the company's 103-year history has also derailed its product strategy -- losing share to rival Airbus SE -- and strained its balance sheet.

"We're going to do a little less visioning and a little less long-term planning," he said.

Analysts had a wide range of expectations for the fourth quarter and full-year loss, largely because of uncertainty over MAX charges. However, the additional compensation charge was less than expected.

Shares seesawed in early trade, reversing an initial loss to recently trade up 0.8% at $324.48.

Boeing recently pushed back its forecast for when regulators will clear the return of the 737 MAX to commercial service, saying it doesn't expect approval until midyear.

However, it plans to restart before securing regulatory approval for the plane to re-enter service. That process, whenever it starts, will have its own set of complications.

For instance, it will take about two months to spool up production at its idled plant near Seattle, according to a person familiar with the company's plans. Unexpected complications or hurdles could include efforts to repair and test planes sitting in storage for months. Boeing froze MAX production after building more than 400 jets it is been unable to deliver, alongside the 380-plus grounded by regulators since March.

Boeing hasn't cut any staff, but some of its suppliers have laid off workers. Airlines that operate the MAX are losing hundreds of millions of dollars as its fleet remains grounded, throwing passengers' travel plans into disarray. The situation has also been disruptive for airlines that have had to deal with months of uncertainty about when the jets might resume flying.

The bill for the MAX crisis has been mounting. The pool of customer compensation was increased by $2.6 billion in the latest quarter to take the expected bill to $8.8 billion for 2019. Higher production costs for the MAX added another $6.2 billion, with $4 billion of that expected to be spread through 2020.

Costs could rise, depending on when the troubled jetliner is able to re-enter service. Most carriers have removed the plane from schedules through June. Some, such as United Airlines Holdings Inc., have said they don't expect to fly it this summer.

Boeing said it burned through $2.2 billion in cash during the quarter but ended the year with $10 billion in liquidity. It is raising more funding, and debt increased to $27.3 billion at the end of the year. It has also suspended its big stock buyback program to conserve cash and implemented other measures such as an acquisition freeze.

Its cash profile will be dented further by plans to cut 787 Dreamliner production to 12 from 14 later this year and then again to 10 early next year before returning to 12 in 2023. The move reflects the failure of expected orders from China to emerge, even with the recent U.S. trade agreement flagged as including aircraft deals. Boeing hasn't secured a new order from China since the fall of 2017.

Boeing also booked a second charge on its CST-100 Starliner space capsule following the failure of last month's debut mission to reach its planned orbit. The $410 million charge reflects the likelihood Boeing will have to make a second uncrewed launch before it can secure approval to fly with astronauts. It took a $162 million charge on the program in 2016.

Boeing's 777X jet, which flew for the first time last weekend, is behind schedule, and deliveries aren't due to start until next year, potentially forcing a cut in output of the existing 777 model. Its defense unit is under pressure after design issues delayed its KC-46A refueling tanker, and quality problems led the U.S. Air Force to withhold some payments.

The full-year loss compared with a profit of $10.46 billion in 2018, with a per-share loss of $3.47 following a $16.01 profit in 2018. The fourth-quarter per-share loss of $2.33 follows a year-earlier $5.48 profit last time.

Write to Doug Cameron at doug.cameron@wsj.com and Andrew Tangel at Andrew.Tangel@wsj.com

(END) Dow Jones Newswires

January 29, 2020 10:15 ET (15:15 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.