Boeing reported a drop in first-quarter profits due to increased costs associated with the 737 MAX grounding (Jason Redmond)

New York (AFP) – Boeing on Wednesday reported lower first-quarter profits as the global grounding of its 737 MAX plane following two crashes hit earnings.

The results are the first since the company entered crisis mode with the March 10 crash of an Ethiopian Airlines jet, which along with an October Lion Air crash claimed 346 lives.

The US aerospace giant reported $2.1 billion in profits, down 13.2 percent from same period a year ago due in part to $1 billion in costs associated with 737 program.

Revenues dipped 2.0 percent to $22.9 billion.

Boeing also withdrew its full-year profit forecast, citing uncertainty surrounding the 737 MAX.

Shares rallied in pre-market trading, likely reflecting relief that damage from the 737 MAX crisis thus far was not worse.

Regulators ordered the global grounding of the plane shortly after the second crash, a move that has also forced the company to halt new deliveries of its most-ordered plane, denting revenues.

Analysts in recent weeks had trimmed their forecast for Boeing earnings in light of the crisis but will scrutinize Wednesday’s results to see whether they need to further lower expectations.

In addition to the $1 billion in 737 program costs, Boeing said it booked charges associated with a software fix to the jet’s anti-stall system that is thought to have been a factor in both accidents.

– Numerous government probes –

The company announced earlier this month it was cutting monthly production of the 737 by about 20 percent.

Boeing said it is “making steady progress” on the software fix and has conducted more than 135 test flights as it works with global regulators and airlines.

“Across the company, we are focused on safety, returning the 737 MAX to service, and earning and re-earning the trust and confidence of customers, regulators and the flying public,” Chief Executive Dennis Muilenburg said in a statement. 

Muilenburg is expected to be probed on an analyst conference call later Wednesday for details on the company’s interactions with the US Federal Aviation Administration on the software fix. 

As of Tuesday night, the company still had not submitted a request to the agency, a source said.

Other key questions concern any compensation payments to airlines that have been forced to cut flights because of the 747 MAX grounding and not receive new planes been expected in this period. The company also faces numerous government probes, including a criminal investigation involving the US Department of Justice.

Despite the crisis, many analysts are optimistic about Boeing’s long-term prospects given robust global aerospace demand. They expect Boeing will be successful in finding a fix to the 737 MAX’s problems that enables the plane to return to service and continue to command the interest of airlines.

However, some caution Boeing’s reputation has taken a hit from the crisis that could deteriorate further with any additional missteps.

Boeing shares were up 1.0 percent at $377.61 in pre-market trading.

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.