Boeing Co. 737 Max planes are seen at the company’s manufacturing facility in Renton, Washington, U.S., on Tuesday, Mar. 12, 2019.
David Ryder | Bloomberg | Getty Images
General Electric added Boeing’s grounded 737 Max airplanes as “a new risk” in its quarterly earnings report on Tuesday, citing production of engines for the planes and its ownership of several of the aircraft for its leasing business.
GE said it is “working arm in arm with Boeing while actively monitoring the grounding of the 737 MAX fleet.” Despite the addition of the aircraft to the company’s risks, GE reaffirmed the company’s forecast for 2019 in its first-quarter earnings report.
The 737 Max has been grounded worldwide after the March crash of an Ethiopian Airlines plane. That crash came five months after another Boeing Max crashed in Indonesia. The Max’s anti-stall software, MCAS, is suspected in the crashes that killed 346 people.
Here’s what GE said about risks from the Boeing 737 Max:
“Aviation develops, produces, and sells LEAP aircraft engines through CFM International, a company jointly owned by GE and Safran Aircraft Engines, a subsidiary of the Safran Group of France. The LEAP-1B engine is the exclusive engine for the Boeing 737 MAX. In March 2019, global regulatory authorities ordered a temporary fleet grounding of the Boeing 737 MAX. Boeing has announced a temporary reduction in the 737 MAX production rate, and while CFM intends to continue its current production rate for the LEAP-1B, the announcement may impact the timing of those related cash flows.
GECAS owns 29 of these aircraft, all of which are leased to various lessees that remain obligated to make contractual rental payments. In addition, GECAS has made pre-delivery payments to Boeing related to 150 of these aircraft on order and has made financing commitments to acquire a further 19 aircraft under purchase and leaseback contracts with airlines.
As of March 31, 2019, we have approximately $1.5 billion of net assets related to the 737 MAX program that primarily comprises pre-delivery down payments and owned aircraft subject to lease offset by progress collections. No impairment charges were incurred related to the 737 MAX aircraft and related balances in the first quarter of 2019 as we continue to believe these assets are fully recoverable. We continue to monitor these developments with our airline customers, lessees and Boeing. “
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