Tag Archives: Boeing 737 MAX

Boeing to recognize charge and increased costs in second quarter due to 737 MAX grounding

Boeing has made this announcement on the on-going grounding of the 737 MAX:

Boeing has announced it will recognize an impact to earnings when it releases second quarter 2019 results on July 24.

Boeing will record an after-tax charge of $4.9 billion1 ($8.74 per share) 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. This charge will result in a $5.6 billion reduction of revenue and pre-tax earnings in the quarter.

While the entire estimated amount will be recognized as a charge in the second quarter, the company expects any potential concessions or other considerations to be provided over a number of years and take various forms of economic value.

Additionally, Boeing’s estimated costs to produce the aircraft in the 737 accounting quantity increased by $1.7 billion in the second quarter, primarily due to higher costs associated with a longer than expected reduction in the production rate. The increased 737 program costs will reduce the margin of the 737 program in the second quarter and in future quarters.

Boeing continues to work with civil aviation authorities to ensure the 737 MAX’s safe return to service, and these authorities 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 U.S. and other jurisdictions begins early in the fourth quarter 2019. 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 will further assume a gradual increase in the 737 production rate from 42 per month to 57 per month in 2020, and that airplanes produced during the grounding and included within inventory will be delivered over several quarters following return to service. Any changes to these assumptions could result in additional financial impact.

“We remain focused on safely returning the 737 MAX to service,” said Boeing Chairman, President and CEO Dennis Muilenburg. “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 recognized this quarter reflects the current challenges and helps to address future financial risks.”

Boeing Chief Financial Officer and Executive Vice President of Enterprise Performance and Strategy Greg Smith added, “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. 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. Due to the uncertainty of the timing and conditions concerning 737 MAX return to service, new guidance will be issued at a future date.

1 = Reflects the tax impact recorded in the second quarter of 2019. Based on current assumptions, additional tax impact would be recorded later in the year bringing the 2019 after-tax charge down to approximately $4.4 billion.

Photo: Joe G. Walker.

Advertisements

Boeing’s statement on the latest issue concerning the 737 MAX software

Boeing issued this statement:

The safety of our airplanes is Boeing’s highest priority. During the FAA’s review of the 737 MAX software update and recent simulator sessions, the Federal Aviation Administration (FAA) identified an additional requirement that it has asked the company to address through the software changes that the company has been developing for the past eight months. The FAA review and process for returning the 737 MAX to passenger service are designed to result in a thorough and comprehensive assessment. Boeing agrees with the FAA’s decision and request, and is working on the required software. Addressing this condition will reduce pilot workload by accounting for a potential source of uncommanded stabilizer motion. Boeing will not offer the 737 MAX for certification by the FAA until we have satisfied all requirements for certification of the MAX and its safe return to service.

FAA finds a new problem with the Boeing 737 MAX

The Federal Aviation Administration (FAA) has uncovered a new issue with the troubled Boeing 737 MAX.

Boeing must address the new issue before the FAA will re-certify the type to fly again in revenue service.

Read the full story for NPR.

Copyright Photo: Joe G. Walker. Undelivered Boeing 737 MAX aircraft are stacking up in the Pacific Northwest and other parts of the country.

 

Video: Boeing 737 MAX aircraft stacking up

From KING 5:

Take in a birds-eye view of the grounded Boeing 737 MAX planes parked at the aerospace giant’s Renton factory and at Boeing Field. The company is working on a fix to a safety system that’s blamed in two deadly crashes before the FAA approves the MAX for flight again.

CNN: Sullenberger’s experience in a 737 MAX simulator made him see how pilots ran out of time

From CNN:

“The pilot who orchestrated the dramatic plane landing in the Hudson River10 years ago told a congressional panel Wednesday that he can see how crews would have struggled during the recent Boeing 737 MAX crashes after he spent time in a simulator running recreations of the doomed flights.

Chesley “Sully” Sullenberger’s testimony before the House Transportation Committee comes as Boeing is working to get the planes, grounded worldwide since March, certified by the Federal Aviation Administration and back in the air.
Copyright Photo: Joe G. Walker.
“I recently experienced all these warnings in a 737 MAX flight simulator during recreations of the accident flights. Even knowing what was going to happen, I could see how crews could have run out of time before they could have solved the problems. Prior to these accidents, I think it is unlikely that any US airline pilots were confronted with this scenario in simulator training,” Sullenberger said.
Sullenberger, whose “Miracle on the Hudson” landing in 2009 saved the lives of all 155 people on board, told the panel that it’s important pilots don’t have “inadvertent traps.”
Read the full report.

CNBC: Boeing CEO says 737 MAX jets should be flying by the end of the year

Boeing’s CEO Dennis Muilenburg is now saying the troubled 737 MAX will be able to fly again by the end of the year (which is now later than the previous statement) according to CNBC.

Read the full article.

This will lead to further compensation claims against Boeing by the affected airlines.