GE to lose $1.4 billion this year from Boeing 737 Max grounding but expects jet’s return next year


Technicians build LEAP engines for jetliners at a new, highly automated General Electric (GE) factory.

Alwyn Scott | Reuters

General Electric continues to burn cash at its aviation business, as the grounding of Boeing’s top-selling 737 Max caused GE to delay production of engines for the aircraft.

This year, GE has logged significant working capital losses from headwinds to its business, with Chief Financial Officer Jamie Miller telling shareholders on Wednesday “a big chunk of that is the 737 Max.” GE makes the LEAP engines used for the 737 Max, which has been grounded worldwide following two deadly crashes in the past year.

“We still expect this year to be impacted to the tune of about negative $1.4 billion,” Miller said of delays in aircraft engine production during the company’s third-quarter earnings call.

Still, GE’s key aviation business logged an 8% increase in revenue during the third quarter from the same period last year, climbing to $8.1 billion from $7.5 billion. That’s in part because the company sold 455 LEAP engines during the quarter, 50% more than a year earlier.

“What we have seen in the second half – and we’ve seen it third quarter and will continue to see it in the fourth quarter – is an acceleration of the LEAP 1B shipments in anticipation of the Max return to service,” Miller said.

While Miller says the ramp in LEAP production depends on when and how regulators reintroduce the 737 Max into commercial service, GE expects the airplane will begin flying again in 2020.

“We’re going to try to follow Boeing’s lead here when we talk about the full-year cash headwinds this year due to Max,” CEO Larry Culp said.

GE’s current forecast is “a conservative financial planning assumption,” Culp added, as his company does not expect the airplane will be flying again before the end of the year.

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