Boeing takes $4.9B charge over grounded 737 Max

DALLAS — Boeing says it will take a $4.9 billion charge to cover possible compensation to airlines whose Max jets remain grounded after two deadly accidents.

Chicago-based Boeing said Thursday that the calculation was based on an assumption that regulatory approval for the plane’s return to flying will begin early in the fourth quarter.

That timing is earlier than some analysts expect and may have contributed to a rally in Boeing shares in after-hours trading.

Boeing said the after-tax charge will cause a $5.6 billion reduction in revenue and pretax earnings for the April-through-June quarter. Boeing is scheduled to report financial results next week.

Airlines around the world have canceled thousands of flights since March, when regulators grounded the Boeing 737 Max and the company suspended deliveries of new jets.

Boeing is also raising its estimate of Max production costs by $1.7 billion because production will be reduced longer than expected. Boeing is still working on fixing flightcontrol software that appeared to play a role in crashes that killed 346 people off the coast of Indonesia and in Ethiopia.

The plane’s return has been pushed back several times.

That discovery prompted Boeing to say in late June that it expected to present its proposed fix to the FAA “in the September timeframe.” It would likely take several more weeks for the FAA and other regulators to approve Boeing’s work, give pilots additional training and bring long-parked jets up to flying condition.

Boeing faces dozens of lawsuits in U.S. courts from families of the passengers. Families of the victims of the Oct. 29 crash of a Max operated by Indonesia’s Lion Air have agreed to consider mediation, but relatives of passengers on an Ethiopian Airlines Max that crashed March 10 have resisted Boeing’s requests, according to their lawyers.

Analysts have estimated that Boeing’s liability to the families will be far less than the cost of compensating its airline customers.

Boeing says concessions to airlines will be spread over several years, but it is taking the entire estimated expense as a charge in the second quarter. Boeing did not specify what form the compensation would take but hinted that it would not be entirely in cash.