Tag Archives: Boeing

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.

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Boeing dedicates $50 million of pledged $100 million to near-term relief for families of the victims of the Lion Air flight 610 and Ethiopian Airlines flight 302 accidents

Boeing has made this announcement:

Boeing has announced that it has dedicated $50 million of a previously announced $100 million fund to provide near-term financial assistance to families of the victims of the Lion Air Flight 610 and Ethiopian Flight 302 accidents.

Boeing also announced that it has retained Kenneth Feinberg and Camille Biros, renowned experts in establishing and overseeing victims’ compensation funds, to design and administer the fund.

“The tragic loss of life in both accidents continues to weigh heavily on all of us at Boeing, and we have the utmost sympathy for the loved ones of those on board,” said Dennis Muilenburg, Boeing chairman, president and CEO. “Through our partnership with Feinberg and Biros, we hope affected families receive needed assistance as quickly and efficiently as possible.”

The $50 million fund represents the initial expenditure of a $100 million pledge by Boeing to address family and community needs of those affected by the accidents. All monies distributed by Mr. Feinberg and Ms. Biros will be independent from any resolution provided through the legal process.

“We are honored to take on this important assignment of providing needed financial relief to the families of these two tragedies,” added Kenneth Feinberg.

Co-Administrator Camille Biros continued, “We know how important it is to assist the families of the victims who have endured a personal tragedy and will work to design and administer the fund and distribute the money as efficiently and expeditiously as possible.”

Copyright Photo: Joe G. Walker.

Note: Meanwhile all of the Boeing 737 MAX airplanes in the world remain grounded and out of service.

Boeing makes a financial offer to the families and communities affected by the Lion Air flight 610 and Ethiopian Airlines flight 302 accidents

Boeing has made this announcement:

Boeing has announced $100 million in funds to address family and community needs of those affected by the tragic accidents of Lion Air flight 610 and Ethiopian Airlines flight 302. These funds will support education, hardship and living expenses for impacted families, community programs, and economic development in impacted communities. Boeing will partner with local governments and non-profit organizations to address these needs. This initial investment will be made over multiple years.

“We at Boeing are sorry for the tragic loss of lives in both of these accidents and these lives lost will continue to weigh heavily on our hearts and on our minds for years to come. The families and loved ones of those on board have our deepest sympathies, and we hope this initial outreach can help bring them comfort,” said Dennis Muilenburg, Boeing chairman, president and CEO.

“We know every person who steps aboard one of our airplanes places their trust in us. We are focused on re-earning that trust and confidence from our customers and the flying public in the months ahead.”

Boeing will release additional information in the near future.

Consistent with Boeing’s regular process for employee charitable donations, company employees will also have the opportunity to make donations in support of the families and communities impacted by the accidents. Boeing will match these employee donations through December 31, 2019.

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.

Oman Air is ready to start talking to Airbus

More bad news for Boeing.

From Reuters:

“Oman Air CEO Abdulaziz Al Raisi plans to hold talks with Airbus if Boeing does not provide a support and recovery plan for its grounded 737 MAX planes before June 17, a statement by the Omani company said on Friday.”

“The grounding of the 737 MAXs has had a major financial impact on Oman Air,” the statement cited Raisi as saying.

“The airline’s expansion plans for 2019 had been significantly curtailed” and Oman Air “also suffered revenue losses and market share declines,” he added.

The Oman Air CEO said Boeing ‘’promised a recovery and support plan for Oman Air that would be submitted to the airline before the upcoming Paris Airshow starting on 17th June 2019.’’

“If I don’t hear back from Boeing before I arrive at Le Bourget Airport, then I will have to go ahead with my planned business lunch with Airbus at the airshow,” the Oman Air statement cited Raisi as saying.”