Boeing Co plans to report a US$4.9 billion accounting charge with its second-quarter results next week, a sign of the widening financial toll from the company’s beleaguered 737 MAX jetliner.
The after-tax write-down, equivalent to US$8.74 per share, covers potential concessions and considerations for airline customers who have been forced to cancel flights and line up replacement aircraft as the MAX’s grounding enters its fifth month, Boeing said in a statement on Thursday.
The costs would clip US$5.6 billion from revenue and pretax earnings in the quarter.
The assumptions behind the accounting charge also provided a glimpse of Boeing’s recovery plan for its best-selling jet, which crashed twice in a five-month span and engulfed the US planemaker in one of the worst crises of its century-long history.
The company estimated that the MAX would be approved to return to service in the US and other countries beginning “early in the fourth quarter,” easing fears that the timetable would slip to next year.
“This is a defining moment for Boeing,” chief executive officer Dennis Muilenburg said in the statement. “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 climbed 1.9 percent to US$367.95 after the close of regular trading in New York.
Since the March 10 crash of an Ethiopian Airlines 737 MAX 8 jet, Boeing has dropped 15 percent, the biggest decline on the Dow Jones Industrial Average.
While Boeing warned that the timing of a return to service could change, the estimate of fourth-quarter approval was in line with schedule changes by the model’s US operators.
United Airlines Holdings Inc, American Airlines Group Inc and Southwest Airlines Co have removed the airplane from their schedules through early November.
The fourth-quarter time frame also rebuts a Wall Street Journal report suggesting that initial flights would slip to next year.
“While it’s still fluid, Boeing must have a decent handle on it or they wouldn’t have thrown a date out there,” Bloomberg Intelligence analyst George Ferguson said.
“I have to think they are far enough along in the process that they feel they understand everything the FAA needs,” he said, referring to the US Federal Aviation Administration.
Boeing’s calculations also assume that production of its 737 jetliners would gradually build to 57 per month next year, earlier than some analysts have estimated.
Aircraft produced during the grounding, and already included in the company’s inventory, would be delivered “over several quarters” once the MAX is cleared to fly, the company said.
More than 500 of the aircraft are stored around the globe, including about 150 newly built models that Boeing cannot send to airlines while MAX flights are halted.
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