Boeing Co (BA.N) said on Thursday it would take an after-tax charge of $4.9 billion in the second quarter on estimated disruptions from the prolonged grounding of its lucrative 737 MAX passenger jets after two deadly crashes, Trend reports citing Reuters.
FILE PHOTO: The company logo for Boeing is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., March 11, 2019. REUTERS/Brendan McDermid
The charge is from “potential concessions and other considerations to customers,” and the impact of continued lower production, the world’s largest planemaker said in a statement, as airlines that use the planes extend flight cancellations until November.
The charge will result in a $5.6 billion reduction in revenue and pre-tax earnings in the second quarter, Boeing said.
Boeing shares rose 2 percent in after-hours trading, which Morgan Stanley analyst Rajeev Lalwani said was a sign that investors were comfortable with the size of the charge and Boeing’s production plans, disclosed less than a week before the company plans to release quarterly financial results on July 24.
“The company showed a degree of confidence in a return to service before year-end and getting up to 57 per month on 737 production in about 12 months, which investors were increasingly skeptical of,” Lalwani said.
Boeing is facing one of the worst crises in its history as its fastest-selling jetliner has been grounded since March after crashes in Ethiopia and Indonesia that together killed 346 people in a span of five months.
The Chicago-based planemaker is now reckoning with a blow to its reputation as well as the financial cost of getting its planes back in the air.
“We are taking appropriate steps to manage our liquidity and increase our balance sheet flexibility the best way possible as we are working through these challenges,” Boeing Chief Financial Officer Greg Smith said in a statement.
Boeing Chief Executive Dennis Muilenburg said in a tweet that the company remains focused on safely returning the 737 MAX to service.
“The MAX grounding presents significant challenges for our customers, company and supply chain,” he tweeted.
The grounding of the 737 MAX has sent shockwaves through the industry and pushed back the launch of a new Boeing aircraft - a twin-aisle jet for the middle of the market known as NMA.
Boeing’s board is unlikely to give the project a green light until it has a full picture of the financial exposure caused by the 737 crisis, industry sources say.
Boeing also said estimated costs to produce its flagship single-aisle aircraft increased by $1.7 billion in the second quarter, driven primarily by higher costs from a longer-than-expected reduction in its aircraft production rate.