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Boeing warns of 737 production halt as grounding affects Q2 results

Boeing has warned it could decide to stop 737 Max production should the ongoing regulatory review extend beyond the company's current expectation.

The Chicago-based aircraft manufacturer is working under the assumption that regulators will begin lifting the grounding of the beleaguered aircraft in the fourth quarter of 2019.

"Should our estimate of the anticipated return to service change, we might need to consider possible further rate reductions and other options, including a temporary shutdown of the Max production," Boeing chief executive Dennis Muilenburg said on July 24 during the company's second quarter earnings announcment.

Boeing also announced a delay to the 777X programme and revealed that some global regulators might require pilots to complete simulator training prior to flying the 737 Max.

The grounding has badly affected Boeing's second quarter results, with the company reporting a $5.6 billion charge against revenue. That figure reflects the expected impact, over several years, of concessions Boeing will make to customers due to 737 Max delivery delays. The company has also added $2.7 billion to the 737 Max's programme cost, with that amount to be spread among deliveries of some 3,100 aircraft, noted Muilenburg.

Boeing's second quarter revenue dropped 35% in one year to $15.8 billion, resulting in a net loss of $2.9 billion. The company earned a $2.2 billion net profit in the second quarter of 2018. The commercial aircraft unit posted an operating loss of $4.9 billion, reversing a $1.8 billion operating profit for the same period last year. Commercial aircraft revenue slipped 66% year-on-year to $4.7 billion.

Boeing's other units however, performed well. The Global Services division's revenue surged 11% in one year to $4.5 billion for the quarter, with operating profit jumping 14% to $687 million. Boeing's defence, space and security revenue jumped 8% year-on-year to $6.6 billion, with operating profit up 159% to $975 million.

During the quarter Boeing announced new service deals with the International Airlines Group (IAG), Delta Air Lines and JetBlue Airways. Notably, the IAG deal includes work in support of A320-family aircraft operated by British Airways – Boeing's first such deal for an aircraft outside its portfolio.

"We aim to continue growing faster than the average services growth rate of 3.5%," said Muilenburg.

Commentary on the company's earnings returned to the 737 Max however, with the manufacturer noting that it had hoped regulators would have already lifted the grounding, which took effect in March following the second accident. But in June the Federal Aviation Administration announced it discovered a data processing issue involving the 737 Max's flight computer, creating further delays. Boeing now anticipates it will complete a certification flight and deliver a final softwar