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Boeing sees billions more in MAX costs as grounding drags on
NEW YORK, July 19, 2019 (BSS/AFP) – Boeing announced Thursday some $6.6
billion in additional costs because of the 737 MAX crisis, further pressuring
profitability as the global grounding of the plane following two deadly
crashes drags on.
Boeing said that second-quarter earnings would be hit by $4.9 billion in
one-time after-tax costs to compensate airlines for disruptions and plane
delivery delays due to the MAX grounding.
Profits will also be weighed down by another $1.7 billion in costs due to
the 737 MAX’s lower production rate, the company said in a statement after
the stock market closed.
The MAX has been grounded since mid-March following two crashes that killed
346 people, dual disasters that have tarnished Boeing’s reputation and
sparked numerous lawsuits from the families of victims.
There is still no firm timetable to bring the planes back into service.
“We remain focused on safely returning the 737 MAX to service,” said Boeing
chief executive Dennis Muilenburg. “This is a defining moment for Boeing.
“The MAX grounding presents significant headwinds and the financial impact
recognized this quarter reflects the current challenges and helps to address
future financial risks.” – Foggy timeline –
Boeing also said Thursday it hopes to receive regulatory approval to return
the aircraft to service early in the fourth quarter.
But this timeline was only the company’s “best estimate” and actual timing
could differ, Boeing said.
The company is due to report second-quarter earnings on July 24.
Earlier Thursday, Southwest Airlines pushed back its target date for the
returning the MAX to service by about a month to November 2, saying the
timeframe was “still uncertain.”
The US Federal Aviation Administration late last month identified a fresh
problem with the 737 MAX during simulator testing, further clouding the
outlook for the plane’s return to service.
The FAA “is following a thorough process, not a prescribed timeline, for
returning the Boeing 737 MAX to passenger service,” an agency spokesman said.
“The FAA will lift the aircraft’s prohibition order when we deem it is safe
to do so.”
Michel Merluzeau, an analyst at AIR Insight Research, told AFP that it
would be “good news” for Boeing if the planes do return to service in the
first quarter of 2020.
– Earlier MAX costs –
The latest costs add to the overall financial hit from the crisis. In
April, Boeing disclosed $1 billion in additional costs due to lowering the
production level of the 737 MAX.
The company last month announced it would give $100 million to communities
and families affected by the 737 MAX disasters.
But those donations have not silenced critics of the company, including
from Paul Njoroge who castigated the company as greedy and reckless before a
congressional panel on Wednesday.
“Boeing should not be allowed to act like a mere investment company
extracting wealth to super-charge shareholder returns at the expense of
safety and quality,” said Njoroge, whose wife, three children and mother-in-
law died in the March 10 Ethiopian Airlines disaster.
Boeing has been widely criticized over its development of the 737 MAX,
which included a flight handling system called the Maneuvering
Characteristics Augmentation System that has been seen as a factor in both
crashes.
In both crashes, the MCAS pointed the plane sharply downward based on
faulty sensor readings, hindering pilot control after takeoff, according to
preliminary results from crash investigations.
Pilots have said they were not adequately trained on the MCAS system and
that it was not disclosed to them. The FAA has said it was kept in the dark
for more than a year about a problem with a sensor linked to the system.
Shares of Boeing rose 2.5 percent in after-hours trading to $370.00. Shares
had fallen 2.3 percent during the trading session.
BSS/AFP/GMR/0853 hrs