Boeing Taking $4.9B After-Tax Charge in 2nd Quarter After Deadly Crashes, MAX Extended Grounding Through November

  • Boeing announced on Thursday that it would take a $4.9 billion after-tax charge for the second quarter related to grounding the 737 MAX after two deadly crashes resulted in more than 300 deaths.
  • The multi-billion dollar charge is related to “potential concessions and other considerations to customers.”
  • It’s also related to the effect of reduced production as the company announced that airlines that use the 737’s will extend cancellations through November.
  • In a statement, Boeing said “the charge will result in a $5.6 billion reduction in revenue and pre-tax earnings in the second quarter.”
  • In a bit of good news for the company, shares rose 2% in after-hours trading because, according to an analyst, it’s “a sign that investors were comfortable with the size of the charge and Boeing’s production plans.”
  • Morgan Stanley analyst Rajeev Lalwani said: “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.”
  • The 737 MAX was Boeing’s fastest-selling jet in its history, but with its grounding in March after the deadly Indonesian and Ethiopian crashes, the company has faced its worst-ever crisis.
  • Not only is Boeing dealing with a financial hit but also a reputational one where it must convince lawmakers and the public that the company can be trusted going forward.
  • In a statement, Boeing Chief Financial Officer Greg Smith said: “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 Executive Dennis Muilenburg tweeted: “The MAX grounding presents significant challenges for our customers, company and supply chain.”

Reference Links

  • Reuters: Boeing takes $4.9 billion charge for prolonged grounding of 737 MAX planes READ
  • YAHOO! Finance: Stock Market News: Boeing Flies Despite MAX Charge; Microsoft Floats on Cloud 9 READ
  • MarketWatch: Boeing stock rallies after aircraft maker puts a price tag on 737 Max debacle READ
  • The Guardian: Boeing Max 737: airlines delay plane’s return until November READ

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