Boeing Loses $5.6 Billion Over 737 MAX Grounding
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.
Boeing expects to take a $5.6 billion hit due to the 737 MAX grounding, it said in a statement Thursday.
The company said that the grounding will result in a $5.6 billion reduction of revenue and pre-tax earnings, or $4.9 billion after tax, in the second quarter of 2019. Costs include having to compensate airlines that fly the aircraft, which has been grounded since mid-March after two crashes resulted in hundreds of deaths.
The company also said the costs to produce the aircraft have risen by $1.7 billion in the second quarter, “primarily due to higher costs associated with a longer than expected reduction in the production rate.”
These increased production costs will be spread out over multiple years but will reduce the profitability of the 737 MAX program, which until the grounding, was one of the manufacturer’s quickest-selling aircraft.
Boeing has also not factored in the $100 million it will be paying to crash victims’ families and costs from any potential lawsuits.
Thursday, Southwest joined other MAX operators in announcing that it will not reintroduce the aircraft into the fleet before November, pushing back from the previous estimate of October.
Boeing still expects the aircraft to receive regulatory approval from the FAA in the early fourth quarter of 2019, and factored that into the estimates of how much the grounding would cost the company.
“We remain focused on safely returning the 737 MAX to service,” said Boeing Chairman, President and CEO Dennis Muilenburg in a statement. “This is a defining moment for Boeing. 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.”
Featured photo by Stephen Brashear/Getty Images.
WELCOME OFFER: 60,000 Points
TPG'S BONUS VALUATION*: $1,200
CARD HIGHLIGHTS: 2X points on all travel and dining, points transferrable to over a dozen travel partners
*Bonus value is an estimated value calculated by TPG and not the card issuer. View our latest valuations here.
- Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 toward travel when you redeem through Chase Ultimate Rewards®
- 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
- Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 60,000 points are worth $750 toward travel
- Get unlimited deliveries with a $0 delivery fee and reduced service fees on orders over $12 for a minimum of one year on qualifying food purchases with DashPass, DoorDash's subscription service. Activate by 12/31/21.
- Earn 5X points on Lyft rides through March 2022. That’s 3X points in addition to the 2X points you already earn on travel.