Boeing to Take $4.9 Billion Charge Related to Grounded 737 Max as Fallout Continues

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Ahead of its earnings report next week, Boeing on Thursday said it will report
an after-tax charge of $4.9 billion related to its grounded 737 Max jets.

The company said in an update that the charge was related to “an estimate of
potential concessions and other considerations” for its clients who have been
forced to continue revising their flight schedules with no clear end in sight.
The company said the charge would result in a $5.6 billion hit to revenue and
pre-tax earnings for the quarter.

“We remain focused on safely returning the 737 MAX to service,” Boeing Chairman,
President, and CEO Dennis Muilenburg said 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.”

Boeing said that it estimated the 737 Max would return to service “early in the
fourth quarter” of this year, but regulatory reviews are ongoing and it’s
possible the planes could remain grounded into next year. Citing Federal
Aviation Administration officials and pilot-union leaders, the Wall Street
Journal reported this week that the 737 Max may not be approved for commercial
flight before January 2020.

The FAA said in June that it was “following a thorough process, not a prescribed
timeline, for returning the Boeing 737 Max to passenger service,” adding that it
would lift the order when it determined it was safe. The agency is in the
process of reviewing a software update and pilot training procedures following
two separate deadly crashes that resulted in the deaths of hundreds of people.

Meanwhile, airlines with the 737 Max in their fleets—including a number of major
U.S. carriers—have repeatedly been forced to cancel flights as a result of the
reviews. Most recently, United Airlines said it was extending flight
cancellations through the first week of November, with American Airlines
following suit earlier this week.



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