Boeing announced a $4.9 billion charge in the second quarter for the MAX groundings, with that charge focusing on payments to customers assuming a 4th quarter 2019 return to service. That charge is in addition to the $2.2 billion in after tax cost increases to the 737 accounting block, and does not include compensation to customers, which could be extensive.
Reactions on Wall Street were positive, as expectations were in the $10-$20 billion range, which we believe is still possible. Bad news at Boeing
comes in pieces, just as things are always “good until they are not.” While $5B is a major impact, it is better than a one-time charge of $10-20B, which is where things may still end up.
Analysis
We believe that a 4Q19 return to service is unlikely, as would the FAA authorizing a return to service that is not coordinated with international regulators. As a result, we believe that the aircraft will not return to service until 1Q19 at best, and possibly 2Q20 before all international regulators provide final approval.
Boeing announced a $4.9 billion chargein the second quarter for the MAX groundings, with that charge focusing on payments to customers assuming a 4th quarter 2019 return to service.That charge is in addition to the $2.2 billion in after tax cost increases to the 737 accounting block, and does not include compensation to customers, which could be extensive.
Reactions on Wall St. were positive, as expectations were in the $10-$20 billion range, which we believe is still possible. Bad news at Boeing comes in pieces, just as things are always “good until they are not.” While $5B is a major impact, it is better than a one-time charge of $10-20B, which is where things may still end up.
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