Boeing feels more financial pain from 737 MAX issue

Sunday, 21 Jul, 2019

The multinational manufacturer, which said that the grounding of its 737 Max jets is to reduce its "revenue and earnings by $5.6 billion in the second quarter", will set aside $4.9 billion to reimburse the airlines that suffered from the grounding.

Boeing said its estimated costs to produce the aircraft increased by $1.7 billion in the second quarter, mostly due to higher costs associated with a longer than expected reduction in the production rate.

The company estimated that the MAX would be approved to return to service in the U.S. and other countries beginning "early in the fourth quarter", easing fears that the timetable would slip to next year.

The 737 MAX grounding crisis will cost Boeing $5.6 billion in revenue, to be recognized in the financial results of the second quarter of 2019.

The price is made a decision to wipe out earnings when the world's supreme planemaker posts quarterly results subsequent week.

Boeing's MAX planes were removed from service by federal aviation regulators in March after 157 people were killed in an Ethiopian Airlines MAX plane six minutes after takeoff. The increased cost is expected to chip away at profits beyond just the second quarter.

"Any changes to these assumptions could result in additional financial impact", Boeing said.

Despite the charge, the 737 Max is Boeing's bestselling jet, and it has a stockpile of almost 5,000 of the planes on order.

Boeing's President and CEO Dennis Muilenburg expressed "utmost sympathy" for the victims, saying "the tragic loss of life in both accidents continues to weigh heavily on all of us at Boeing".

Following similar recent announcements by United and American, Southwest Airlines has announced that its Boeing 737 Max flights have been cancelled until early November.

"The Max grounding gifts fundamental headwinds and the monetary affect recognised this quarter reflects the most up-to-date challenges and helps to address future monetary dangers".

Boeing said finalizing a software fix to return the Max 8 and Max 9 to service may take until September.

Southwest operates 34 Boeing 737 MAX 8 planes and more than half of the flights out of Sacramento International Airport are through Southwest, according to previous reporting by The Bee. That inventory figure will grow significantly when the company reports earnings next week because Boeing built 42 new 737 Max jets every month during the quarter and parked them wherever it could find space.