Boeing to take $4.9bn hit to compensate for 737 Max
Aircraft manufacturer says grounded jet will return to service in fourth quarter
Since the March 10th crash of an Ethiopian Airlines 737 Max jet, Boeing shares have dropped 15%, the biggest decline on the Dow Jones Industrial Average
Boeing plans to report a $4.9 billion (€4.36bn) accounting charge related to its beleaguered 737 Max jetliner, and said the aircraft would return to service in the fourth quarter, easing fears the timetable could slip into next year.
The after-tax writedown, equivalent to $8.74 a share, covers potential compensation for airline customers who have been forced to cancel flights and line up replacement aircraft as the Max’s grounding enters its fifth month, Boeing said in a statement Thursday. The costs will clip $5.6 billion from revenue and pretax earnings in the quarter.
The assumptions behind the accounting charge also provided a glimpse of Boeing’s recovery plan for its best-selling jet, which crashed twice in a five-month span and engulfed the US planemaker in one of the worst crises of its century-long history.
The company estimated that the Max will be approved for flights in the US and other countries beginning “early in the fourth quarter”.
“This is a defining moment for Boeing,” chief executive Dennis Muilenburg said in the statement. “The Max grounding presents significant headwinds and the financial impact recognised this quarter reflects the current challenges and helps to address future financial risks.”
Shares in Boeing rose more than 3.7 per cent in Friday morning trade in New York. Since the March 10th crash of an Ethiopian Airlines 737 Max 8 jet, Boeing has dropped 15 per cent, the biggest decline on the Dow Jones Industrial Average.
While Boeing warned that the timing of a return to service could change, the estimate of fourth-quarter approval was in line with recent schedule changes by the model’s US operators United Airlines, American Airlines and Southwest Airlines.
The fourth-quarter time frame also rebuts a recent Wall Street Journal report suggesting that initial flights would slip to 2020.
“While it’s still fluid Boeing must have a decent handle on it or they wouldn’t have thrown a date out there,” said George Ferguson, an analyst with Bloomberg Intelligence. – Bloomberg