Boeing sees US$4.9B charge as 737 Max fallout worsens
CHICAGO Boeing Co. plans to record a Us$4.9-billion accounting charge related to its beleaguered 737 Max jetliner when the company reports quarterly earnings next week.
The after-tax charge, equivalent to US$8.74 a share, covers potential concessions and considerations for airline customers who have been forced to cancel thousands of flights and line up replacement aircraft since the Max was grounded in March, the company said in a statement Thursday. The costs will clip US$5.6 billion from revenue and pre-tax earnings in the quarter.
The writedown underscores the financial cost to Boeing after two deadly crashes in a five-month span engulfed the U.S. plane-maker in one of the biggest crises in its century-long history. New flight-computer software on the Max, Boeing ’s best-selling jet, has been linked to the disasters in Indonesia and Ethiopia, and company engineers are still working on an update.
“This is a defining moment for Boeing,” chief executive Dennis Muilenburg said in the statement. “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.”
Boeing climbed 1.3 per cent to US$365.66 after the close of regular trading in New York. Since the March 10 crash of an Ethiopian Airlines 737 Max 8 jet, Boeing has fallen 15 per cent, the biggest decline on the Dow Jones Industrial Average.
Investors will be parsing the company’s results, slated for July 24, for more details of the financial blow that Boeing is absorbing as it churns out the Max while waiting for regulators to clear the single-aisle workhorse to resume commercial flights. Boeing said it’s assuming that approval of the plane’s “return to service in the U.S. and other jurisdictions begins early in the fourth quarter” of this year.