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Boeing offers services and cash to make Max operators whole

Boeing’s compensation to airlines for the 737 Max grounding could include aircraft services, training support, adjusted delivery schedules or simply cash, the company’s chief executive Dennis Muilenburg said on 29 May.

His comments, made during an investor conference hosted by AllianceBernstein, shed light on how Boeing might mollify airlines for the cost and logistic headaches caused by removing the 737 Max from their operations and fleet plans.

“Obviously, our customers’ fleet schedules have been interrupted by the Max” grounding, Muilenburg says. “There are number of different ways that we can address these issues.”

"In some cases, it's services and training support. In some cases, there are other currencies that we can trade with customers,” Muilenburg adds. “In some cases, cash may be part of the solution.”

He does not specify how much compensation Boeing might end up owning in the end, but suggests the amount will not significantly impact Boeing’s finances, which the 737 Max grounding has already depressed.

“I don’t see this as an additional material event for us,” Muilenburg says.

Boeing's first quarter net profit dipped 13% year-on-year to $2.1 billion, and the Max grounding already added $1 billion in 737 Max programme costs, the company reported in April.

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A recent report from Morgan Stanley says most compensation owed by Boeing will relate to 737 Max that were already in service when the grounding took effect. The FAA pegged that number at 387 aircraft operated by 59 airlines.

But the total number of affected aircraft is much higher due to Boeing’s halt in deliveries. Boeing had been producing 737s (NGs and Max) at about 52 monthly earlier this year, but has delivered only 20 737NGs since early March, suggesting the number of undelivered 737 Max in the last two-and-a-half months could be about 110 aircraft.

Boeing has continued producing 737s, though at a reduced 42-per-month rate, since April and is storing 737 Max aircraft until the grounding is lifted.

Morgan Stanley estimates Boeing will have about 150 737 Max stored by mid-year, assuming the grounding remains in place.

Clearing that backlog will take time, Muilenburg says, noting different countries’ regulators may lift the grounding at different times. Some airlines, having already adjusted their summer flight schedules to account for the grounding, may choose to further delay deliveries, though other airlines might want more aircraft quicker, Muilenburg says.

Morgan Stanley says airlines may not have resources, such as available pilots, to receive all those stored aircraft at once. It estimates Boeing could possibly clear its backlog by year-end – again, assuming regulators clear the 737 Max to fly relatively quickly.

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