Boeing will take $4.9 billion hit through compensation to airlines after two crashes resulted in the global grounding of the 737 Max.
The bill will result in a $5.6 billion reduction of revenue and pre-tax earnings in the company’s second quarter.
The outlay of almost $5 billion is 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 said.
The manufacturer also pledged that $50 million of a previously announced $100 million fund will provide “near-term” financial assistance to families of the victims of the Lion Air and Ethiopian Airlines accidents which killed 346 people.
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Boeing is continuing to work with civil aviation authorities to ensure the 737 Max’s return to service following the grounding in March. The regulators will determine the timing of return to service.
“For purposes of the second-quarter financial results, the company has assumed that regulatory approval of 737 Max return to service in the US and other jurisdictions begins early in the fourth quarter 2019,” Boeing said.
“This assumption reflects the company’s best estimate at this time, but actual timing of return to service could differ from this estimate.”
The second-quarter financial results out on July 24 will further assume a gradual increase in the 737 production rate from 42 a month to 57 a month in 2020.
Aircraft produced during the grounding will be delivered over several quarters following return to service.
“Any changes to these assumptions could result in additional financial impact,” Boeing admitted.
Presient and CEO Dennis Muilenburg said: “We remain focused on safely returning the 737 MAX to service.
“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 recognised this quarter reflects the current challenges and helps to address future financial risks.”
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