By Ankit Ajmera and Eric M. Johnson
(Reuters) – Boeing Co (N:) cut production of its flagship Dreamliner and delayed the arrival of a successor to its 777 mini-jumbo, piling new pressures on a rejigged senior management team as the continued safety grounding of its 737 MAX sliced third quarter profits.
Boeing Co (N:) reported a 53% drop in quarterly profit on Wednesday and had a negative free cash flow of $2.89 billion in the quarter, compared with a positive free cash flow of $4.10 billion a year earlier.
Core operating earnings fell to $895 million or $1.45 per share, from $1.89 billion or $3.58 per share, a year earlier.
Boeing shares were slightly higher in premarket trading at $340.10.
The profit slump and trio of industrial setbacks capped a tumultuous week for the world’s largest planemaker, already in the eighth month of a deepening crisis over the grounding of its best-selling single-aisle following deadly crashes.
On Tuesday, the company ousted the top executive of its crucial airplanes division, Kevin McAllister, in an unexpected management shakeup related to the MAX crisis that senior industry sources say puts Chief Executive Dennis Muilenburg squarely in the firing line in the event of further revelations or if the company fails to recover from the MAX crisis.
Muilenburg’s title of board chairman was stripped earlier this month.
Despite fresh setbacks, Boeing said it was sticking to its expectation that the MAX would return to service in the fourth quarter, though the timeline was at the mercy of regulators conducting certification reviews.
Boeing said there was “no significant change” to estimated potential concessions and other considerations to airline customers related to the 737 MAX grounding, part of the $8 billion price tag Boeing estimated for the MAX earlier this year.
“Our top priority remains the safe return to service of the 737 MAX, and we’re making steady progress,” Muilenburg said in a statement accompanying the results. Boeing has begun taking steps to increase safety oversight in its industrial operations and at the board level, he added.
Boeing plans to cut 787 production, delayed a planned rise in 737 production and the entry into service of the 777X twin-aisle – a trio of industrial setbacks broadening pressure on the company’s new commercial leadership.
Boeing named veteran executive Stan Deal, who had been running its two-year-old Global Services Division, to the top job at commercial airplanes. Deal’s challenge to get the MAX back into service globally while simultaneously handling new aircraft deliveries and boosting 737 production is seen as one of the most formidable logistical challenges in the industry’s history.
Boeing said it was delaying plans to step up production on its 737 line in the Seattle-area through 2019, and would not hit a record-level 57 aircraft monthly until late 2020, months later than previously planned.
Citing global trade tensions, it was also reducing the 787 production rate to 12 airplanes per month for approximately two years beginning in late 2020.
Its forthcoming 777X twin-aisle, facing engine issues at General Electric (NYSE:), was progressing through pre-flight testing and remains on track for first flight in early 2020, but the company was now targeting early 2021 for the first delivery of the 777X.