Boeing will take a $4.9 billion after-tax charge in its second quarter financial results, reflecting estimated costs associated with the 737 Max grounding.

The hit comes “in connection with an estimate of potential concessions and other considerations to customers for disruptions related to the 737 Max grounding and associated delivery delays,” Boeing says on 18 July.

The charge will shave $5.6 billion off Boeing’s second quarter pre-tax earnings and revenue.

Although the charge will hit in the second quarter, it reflects Boeing’s total current estimate of

“potential concessions or other considerations to be provide over a number of years and take various forms of economic value”.

Boeing disclosed the financial hit ahead of releasing its second quarter results, scheduled for 24 July.

The 737 Max has been grounded since March.

The company is working under the assumption that regulators will lift the grounding in the fourth quarter, though the timeline remains uncertain and in regulators’ hands.

“This is a defining moment for Boeing,” chief executive Dennis Muilenburg says in the release. “The Max grounding presents significant headwinds and the financial impact recognised this quarter reflects the current challenges and helps to address future financial risks.”

Boeing has also added $1.7 billion to the 737 Max’s total programme costs. That amount piles on the $1 billion in programme costs Boeing added in April, bringing the total cost increase to $2.7 billion over the life of the 737 Max programme.

Those costs reflect Boeing’s slowing of 737 Max production from 52 to 42 aircraft monthly during the grounding.

“The increased 737 program costs will reduce the margin of the 737 programme in the second quarter and in future quarters,” Boeing says.

The company now anticipates 737 Max production will increase from 42 to 57 aircraft monthly in 2020.

It expects to deliver aircraft produced during the grounding “over several quarters following return to service”.

The company’s chief financial officer Greg Smith says Boeing is “taking appropriate steps to manage our liquidity and increase our balance sheet flexibility the best way possible as we are working through these challenges.”

“Our multi-year efforts on disciplined cash management and maintaining a strong balance sheet, in addition to our strong and broad portfolio offerings, are helping us navigate the current environment,” he says.

Source: Cirium Dashboard