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Boeing expected to take another big, ugly charge on 737 Max crisis

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A year ago, Boeing posted record revenues topping $100 billion with hopes of delivering a chart-topping number of airplanes in 2019, including hundreds of 737 Max jetliners.

The news isn’t going to be so rosy on its fourth-quarter earnings call this year. Those bestselling planes were grounded worldwide in March after the second of two fatal crashes that claimed 346 lives. The crisis cost former CEO Dennis Muilenburg his job, prompted Boeing to suspend production of the planes, drove down orders to the lowest level in decades, hurt its supply chain, and wracked up costs that are now around $10 billion. Wall Street is expecting more bad news.

The Jan. 29 earnings call will be the first for new CEO Dave Calhoun, who took the helm on Monday, days after the company released a trove of shocking internal messages that showed employees dissing regulators and airlines and boasting about getting them to approve less time-consuming training. One showed employees complaining that Lion Air, the operator of the first 737 Max that crashed, wanted simulator training for pilots before they flew the planes.

Calhoun is tasked with cleaning up Boeing’s culture, improving employee morale and repairing damaged relationships with regulators and airlines.

“Many of our stakeholders are rightly disappointed in us, and it’s our job to repair these vital relationships,” Calhoun told Boeing employees on his first day. “We’ll do so through a recommitment to transparency and by meeting and exceeding their expectations. We will listen, seek feedback, and respond — appropriately, urgently and respectfully.”

Jeff Windau, industrials analyst at Edward Jones, said he hopes the call will shed some light on the company.

“It would be nice to get some candid comments,” he said. “I’m not expecting a date [of the return to service] but it would be nice to get some indication where they’re at.”

Several Wall Street analysts now expect Boeing, which reports full-year and fourth-quarter earnings on Jan. 29, to take additional charges related to the troubled airplane. The company took a $5.6 billion pretax charge in July to compensate airlines and other customers for the grounding, which is now in its 11th month.

“They’re going to have to pay more,” said Ron Epstein, aerospace analyst at Bank of America Merrill Lynch. He estimates the total cost of the grounding could reach $20 billion — excluding any settlements from lawsuits from crash victims’ families — if the planes return by June or July. Epstein estimates that about 40% of Boeing’s profits last year came from the Max.

Moody’s Investors Service said it was putting Boeing’s debt on a review for a possible downgrade, less than a month after cutting its credit rating by one-notch, as the crisis wears on longer than expected. The lower the credit rating, the more expensive it is for Boeing to borrow. Boeing, which declined to comment on a potential charge, has previously said it would tap the debt markets if it needs more cash to cover the costs of the crisis.

Sheila Kahyaoglu, aerospace and defense analyst at Jefferies, estimated this week that the charges for aircraft customers’ compensation is likely to rise to $11 billion, and that some of that will be reported later this month. That’s assuming the planes return to service in April, she said.

The Wall Street estimates for its earnings vary widely — from a loss of 23 cents a share to a profit of as much as $2.52 a share, according to analysts polled by Refinitiv. On average, analysts expect the Chicago-based company to report a profit of $1.53 a share — a 72% decline from a year earlier. They estimated a more than 26% drop in revenue to $20.8 billion.

Earlier this month, Boeing threw airline customers another curve ball: It’s recommending additional simulator training for pilots on the Max, a reverse of its previous stance and a step that promises to further delay the planes return to service and drive up costs.

As of Thursday, all U.S. airlines with Maxes in their fleets — American, Southwest and United — have pulled the planes from their schedules until early June, a delay that’s threatening to last until the peak travel season of late spring and the summer.

Analysts are also looking for news on how Boeing will manage its supply chain. Spirit Aerosystems, which makes fuselages and other parts for the planes, announced initial job cuts of 2,800 people last week. Moody’s downgraded its debt to junk territory.

Even the planned pause in production won’t stop the cash drain and will cost Boeing $1 billion a month, estimates J.P. Morgan.

“It doesn’t give you the warm and fuzzies when Spirit lays off 2,800 people,” said BofA’s Epstein. Suppliers are walking a tightrope with the 737 Max, because they don’t want to lack workers when Boeing can resume production. “It’s a tight job market and I’m sure there are a lot to companies that would like to hire them,” Epstein added.

Investors are also closely watching Calhoun for cues about Boeing’s bigger picture. The company has faced problems with its KC-46 refueling tanker. Because it’s hobbled by the 737 Max issues, Boeing hasn’t been able to move forward with a new middle-market airplane, giving a bigger lead to rival Airbus, which recently won orders for its forthcoming long-range, single-aisle plane from airlines including American and United. And the scrutiny of the Max could become more time consuming when regulators review its wide-body Boeing 777X.



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Coronavirus in N.Y.C.: Latest Updates

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Weather: A stormy day, with rain, thunder, strong wind and a high around 60.

Alternate-side parking: Suspended through April 17. Meters are in effect.


Deaths from the coronavirus increased to new daily highs in both New York and New Jersey for a second straight day on Wednesday, underscoring the outbreak’s grip on the region even as other figures showed that its impact was beginning to slow.

An additional 779 people in New York State died of the virus, Gov. Andrew M. Cuomo reported, compared with 731 the day before. In New Jersey, 275 people died, Gov. Philip D. Murphy said, up from 232 on Tuesday. Connecticut reported 49 new deaths on Wednesday after reporting 71 the day before.

More people have died in New York and New Jersey — a total of 7,772 — than in the rest of the United States.

Another grim distinction: New York State, with 149,316 confirmed cases, has had more people test positive for the virus than any country outside the United States, including Italy and Spain, the two other countries the pandemic has hit hardest.

But Mr. Cuomo said hospitalization figures continued to show the curve of infection flattening in the state. The number of virus patients in hospitals increased 3 percent since Tuesday, the fifth consecutive day of increases below 10 percent. By contrast, 25 percent increases were typical in recent weeks.

[Get the latest news and updates on the coronavirus in the New York region.]

Black and Hispanic people in New York City are about twice as likely to die of the virus as white people are, according to preliminary data released by the city on Wednesday.

Mayor Bill de Blasio said Wednesday that the disparities reflected economic inequity and differences in access to health care.

“There are clear inequalities, clear disparities in how this disease is affecting the people of our city,” Mr. de Blasio said. “The truth is that in so many ways the negative effects of coronavirus, the pain it’s causing, the death it’s causing, tracks with other profound health care disparities that we have seen for years and decades.”

Mr. de Blasio and Dr. Oxiris Barbot, the city’s health commissioner, stressed that some of the city’s Hispanic residents might have been discouraged from seeking medical care by the anti-immigrant sentiment that has dominated the national discourse in recent years.

“The overlay of the anti-immigrant rhetoric across this country, I think, has real implications in the health of our community,” Dr. Barbot said.

Mr. Cuomo said on Wednesday that the differences could be partly attributed to some groups having more untreated chronic health problems than others, making them more likely to die of the virus. He also said that black and Hispanic people might also be disproportionately represented in the ranks of workers whose jobs on the front lines of the outbreak put them at risk.

[The virus is killing black and Latino people at twice the rate of whites in N.Y.C.]

Three New York City stores were sued on Wednesday for what officials said was their repeated overcharging for face masks, hand sanitizer, cough medicine and other products that are in short supply amid the coronavirus pandemic.





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US President Trump Says He Has Deployed 3,000 Military and Health Professionals

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U.S. President Donald Trump said Sunday, April 5, at the White House in Washington that as of this upcoming Tuesday he will have deployed over 3,000 military and public health professionals to New York, New Jersey, Connecticut and other parts of the country.
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READ MORE: Trump also sent well wishes to British Prime Minister Boris Johnson after news broke earlier Sunday he had been admitted to a hospital with the coronavirus.
“All Americans are praying for him. He’s a friend of mine,” Trump said.

Johnson’s office said he was being admitted for tests because he still has symptoms 10 days after testing positive for the virus.

During a White House briefing, Trump also announced Washington state will be returning 400 ventilators that Gov. Jay Inslee said were not needed.

The coronavirus is projected to kill more than 100,000 Americans. It has effectively shuttered the economy, torpedoed the stock market and rewritten the rules of what used to be called normal life.

But in this moment of upheaval, Trump and his advisers haven’t lost sight of the opportunity to advance his agenda such as tightening borders and bringing back the entertainment tax deduction. (AP)
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Coronavirus Live Updates: As Economic Pain Grows, So Does Pressure to Ease Lockdowns

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Lockdowns slow the spread but lead to deepening economic pain.

Across the United States, more and more people cannot pay the rent. Food banks are so crowded the National Guard has been called out to stuff boxes. Construction sites sit abandoned, shopping malls are ghost towns and roughly 80 percent of the nation’s hotel rooms stand empty.

The collapse of commercial commerce has already forced 10 million people to seek unemployment benefits, and those numbers were set to swell again on Thursday when the Labor Department releases its latest report.

The bleak domestic picture was matched by the struggles in other countries.

France warned that it was headed toward its sharpest economic downturn since World War II. Germany is sliding toward its deepest recession on record, with growth expected to plunge almost 10 percent from April through June. Demand for oil has dropped by a quarter in recent weeks and supply chains are faltering as factories remain closed and borders sealed.

The deepening economic crisis added pressure to governments to speed up efforts to navigate the precarious path out of lockdown, and some smaller nations across Europe are inching in that direction.

The executive order issued by the governor of Kansas was hardly extraordinary in the age of social distancing, where funerals have been put on hold, weddings canceled and most gatherings around the country nonstarters

But after Gov. Laura Kelly, a Democrat, signed an executive order to ban all gatherings of 10 or more people, including at religious gatherings, Republicans in control of the state’s legislature rescinded the order.

How to celebrate in the time of coronavirus.

Stay-at-home orders don’t have to put a damper on your special days. Here are some ways to celebrate birthdays, weddings and the coming spring holidays.

Reporting was contributed by Peter Baker, Marc Santora, Brooks Barnes, Dan Barry, Conor Dougherty, Nicholas Bogel-Burroughs, Manny Fernandez, Sheri Fink, Michael Levenson, and Carl Zimmer.



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