Boeing to take $4.9 billion charge as 737 Max fallout worsens

Boeing takes $5bn hit over grounding of 737 Max

Boeing takes $5bn hit over grounding of 737 Max

Boeing says it will take a $4.9 billion charge to cover possible compensation to airlines whose Max jets remain grounded after two deadly accidents.

That timing is earlier than some analysts expected and may have contributed to a rally in Boeing shares in after-hours trading.

The company is slated to report results on July 24.

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. That estimated expense has grown by another $1.7 billion, primarily due to a "longer than expected reduction in the production rate", the company said.

The aircraft manufacturer has promised to pay $100 million to the families of the victims of crash.

The $5.6 billion hit to pre-tax earnings is more than half of Boeing's $10.5 billion profit for all of 2018.

"With the timing of the MAX's return-to-service still uncertain, we are again revising our plans to remove the MAX from our schedule through november 2", Southwest said in a prepared statement.

CFRA Research analyst Jim Corridore said putting a figure on airline compensation and the potential return of the plane in the fourth quarter provided important clarity around the damage inflicted by the grounding.

Southwest said in a statement that "we intend to vigorously defend against the claims in the filing and strongly believe that the allegations made are completely without merit". "In general, we are happy to have some details".

According to the airline, it continues to monitor information from Boeing and the Federal Aviation Administration on the impending 737 MAX software enhancements and training requirements. 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.' Boeing's previously-issued 2019 financial guidance did not reflect impacts related to the 737 MAX. Families of the victims of the October 29 crash of a Max operated by Indonesia's Lion Air have agreed to consider mediation, but relatives of passengers on an Ethiopian Airlines Max that crashed March 10 have resisted Boeing's requests, according to their lawyers. Boeing said it was working toward building 57 of the 737s a month in 2020.

Boeing has delivered fewer than 400 Max planes but has unfilled orders for about 4,500.

When it reported first-quarter results in April, Boeing abandoned its 2019 financial outlook, halted share buybacks and said lowered production because the grounding had cost it at least $1 billion so far.

However, in June, U.S. officials identified another flaw with the plane's software that they said must be addressed by Boeing before the Max 8 can fly again.