Boeing (BA) is scheduled to report results of its fiscal second quarter before the market opens on Wednesday, July 24, with a conference call scheduled for 10:30 am ET. What to watch for:
1. GUIDANCE: When Boeing reported its Q1 results on April 24, it announced that previously-issued fiscal 2019 guidance did not reflect 737 MAX impacts. The company added that new guidance would be issued at a future date. While Boeing has not yet announced updated guidance, the company announced that it would record a $4.9B after-tax charge due to the 737 MAX grounding in Q2, which equates to $8.74 per share. The charge is in connection with an estimate of potential concessions and other considerations to customers for disruptions related to the 737 MAX grounding and associated delivery delays. This charge will result in a $5.6B reduction of revenue and pre-tax earnings in the quarter. Along with the announcement of the charge, the company reiterated that it will issue new FY19 guidance at a future date.
2. 737 MAX GROUNDING: On June 26, Reuters reported that United Airlines (UAL) had opted to remove the Boeing 737 MAX from its flying schedule until September 3, resulting in about 1,900 total flight cancellations in August.
On June 27, the Federal Aviation Administration provided an update on the Boeing 737 MAX, saying that it is following a thorough process, not a prescribed timeline, for returning the Boeing 737 MAX to passenger service. "We continue to evaluate Boeing's software modification to the MCAS and we are still developing necessary training requirements. We also are responding to recommendations received from the Technical Advisory Board. The TAB is an independent review panel we have asked to review our work regarding 737 MAX return to service. On the most recent issue, the FAA's process is designed to discover and highlight potential risks. The FAA recently found a potential risk that Boeing must mitigate," The FAA stated. On that same day, Southwest Airlines (LUV) stated that the airline continued to await guidance from Boeing and the FAA on the impending 737 MAX software enhancements and training requirements. "We are encouraged by the reported progress and proposed path forward for returning the aircraft to service, and we remain confident that, once certified by the FAA, the enhancements will support the safe operation of the MAX. We previously revised our flight schedule by removing the MAX through Sept. 2 to offer reliability to our operation and stability for our Customers during the busy summer travel months. With the timing of the MAX's return-to-service still uncertain, we are again revising our plans to remove the MAX from our schedule through Oct. 1," the company stated. On July 1, Reuters reported Southwest CEO Gary Kelly told employees that the company anticipated having to remove the grounded Boeing 737 MAX jets from its flying schedule beyond the current October 1 re-entry date following the discovery of a new safety issue.
On July 7, the Wall Street Journal's Robert Wall reported that Boeing lost a deal for 737 MAX jetliners to Airbus (EADSY). Saudi Arabia's flyadeal said it would buy up to 50 Airbus A320neo planes, the author noted, and added that the deal has a value of more than $5.5B. On July 14, Reuters reported that American Airlines (AAL) said it is extending for a fourth time cancellations of about 115 daily flights into early November due to the ongoing grounding of the Boeing 737 MAX jets.
3. INVESTIGATIONS: On June 28, Steve Miletich of the Seattle Times reported that Federal prosecutors from the Department of Justice have subpoenaed records from Boeing relating to the production of the 787 Dreamliner aircraft in South Carolina, where there have been claims of unsatisfactory work. Miletich cited two sources familiar with the investigation. The DoJ is also conducting a criminal probe into the certification and design of the 737 MAX following two deadly crashes of that plane, Miletech noted. A third source told the Seattle Times that a handful of subpoenas were issued earlier this month to individual employees at the company's 787 Dreamliner plant in North Charleston, South Carolina. On May 24, Bloomberg reported, citing people familiar with the matter, that the SEC is investigating whether Boeing properly disclosed issues tied to the grounded 737 MAX jetliner. The SEC's enforcement division is examining whether Boeing was adequately forthcoming to shareholders about the plane's material issues, sources told Bloomberg. In addition, people told the news agency that the SEC is also reviewing Boeing's accounting to make sure its financial statements have appropriately reflected potential impacts from the problems.