Boeing Loses $5.6 Billion Over 737 MAX Grounding
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Boeing expects to take a $5.6 billion hit due to the 737 MAX grounding, it said in a statement Thursday.
The company said that the grounding will result in a $5.6 billion reduction of revenue and pre-tax earnings, or $4.9 billion after tax, in the second quarter of 2019. Costs include having to compensate airlines that fly the aircraft, which has been grounded since mid-March after two crashes resulted in hundreds of deaths.
The company also said the costs to produce the aircraft have risen by $1.7 billion in the second quarter, “primarily due to higher costs associated with a longer than expected reduction in the production rate”.
These increased production costs will be spread out over multiple years but will reduce the profitability of the 737 MAX program, which until the grounding, was one of the manufacturer’s quickest-selling aircraft.
Boeing has also not factored in the $100 million it will be paying to crash victims’ families and costs from any potential lawsuits.
Boeing still expects the aircraft to receive regulatory approval from the FAA in the early fourth quarter of 2019, and factored that into the estimates of how much the grounding would cost the company.
“We remain focused on safely returning the 737 MAX to service”, said Boeing Chairman, President and CEO Dennis Muilenburg in a statement. “This is a defining moment for Boeing. Nothing is more important to us than the safety of the flight crews and passengers who fly on our airplanes. The MAX grounding presents significant headwinds and the financial impact recognized this quarter reflects the current challenges and helps to address future financial risks”.
Featured photo by Stephen Brashear/Getty Images.