Max Hits Boeing Services In Q4
Still suffering from the 737 Max grounding, Boeing continues to be optimistic about the services market, forecasting it will be worth $3.1 trillion over the next 10 years, of which a little more than half will be for commercial aircraft services.
Nonetheless, fourth-quarter sales from the company’s Global Services division, which encompasses both commercial and military activities, declined by 6%, to $4.6 billion, from the prior-year period.
This was due to lower commercial services volume resulting from the Max grounding, which pushed back “the timing of some service demand from our airline customers”, said chief financial officer Greg Smith.
Operating profit margin was also down year over year, from 15% to 14.7%. Smith said that this “reflected a non-cash charge related to the retirement of the Aviall brand as we consolidate our distribution businesses under the Boeing brand as well as [the] mix of products and services in the quarter”.
On a more optimistic note, Smith said he expected the services dip to be resolved over time as the Max returns to service, and he also highlighted several contract wins during a quarter in which Boeing booked $6 billion of services orders from all customers.
These included a multi-year landing gear exchange services agreement with LATAM; a five-year digital navigation renewal agreement with Saudi Arabian Airlines; and a ForeFlight Dispatch digital solution contract with Flexjet.
The backlog for Global Services in now $23 billion.
In other news, Smith signaled a rethink for the ‘New Midsize Airplane’ program, one that may well see it abandoned entirely.
“We've asked the team to step back and reassess our commercial product development strategy to determine what family of airplanes will be needed in the future,” he said.