Published: Sat, July 20, 2019
Global Media | By Garry Long

Boeing to take $4.9 billion charge over grounded jet

Boeing to take $4.9 billion charge over grounded jet

Boeing Co (BA.N) said on Thursday it would take an after-tax charge of $4.9 billion in the second quarter on estimated disruptions from the prolonged grounding of its lucrative 737 MAX passenger jets after two deadly crashes.

This charge alone will result in a $5.6 billion reduction in revenue and earnings in the quarter, Boeing said.

Boeing also said it was anticipating an additional $1.7 billion in costs associated with the production of the Max, which has had a factory slowdown.

While emphasising the primary importance of proving safety in returning the 737 MAX to service, Boeing President and CEO Dennis Muilenburg described "significant headwinds" from the grounding.

While the entire estimated amount will be recognized as a charge in the second quarter, Boeing said it expects to award the concessions over a number of years in various unspecified forms. Air Canada has removed Max 8 aircraft from its schedule until at least September 2, while in the U.S., Southwest Airlines, American Airlines and United Airlines have removed the plane from their schedules until early November.

Aircraft produced during the grounding, and already included in the company's inventory, would be delivered "over several quarters" once the MAX is cleared to fly, the company said.

However, this assumption reflects the company's best estimate at this time, rather than a concrete deadline.

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Boeing is to issue full second-quarter earnings on July 24, 2019.

The company predicts the troubled 737 Max fleet will have approval to return to operation in the fourth quarter of 2019. Boeing said it expects to compensate customers over several years but made a decision to book all its expected losses in the second quarter.

Boeing chief financial officer Greg Smith added, "We are taking appropriate steps to manage our liquidity and increase our balance sheet flexibility the best way possible as we are working through these challenges".

Dallas-based Southwest (LUV) said on Thursday it would schedule without the 737 MAX until November 2, a decision that proactively removes about 180 daily flights from its schedule, more than the 150 daily flights it was removing through early October.

Boeing froze financial guidance in the wake of the MAX grounding and has offered little financial-related insight on its ramifications. Boeing's part mark rose 2% in after-hours buying and selling on Wall Dual carriageway after the announcement, a stamp that merchants are elated with the price.

Southwest joins other USA carriers American Airlines and United Airlines in removing flights and extending cancellations because of the 737 Max's troubles.

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