Boeing has taken a $4.9 billion pre-tax charge to cover costs resulting from the MAX grounding, compensation and production delays. That’s for Q2, so the charge might increase for the year.
The airframer announced the charge on July 18, six days prior to its HY1 results presentation. Tax impacts could reduce the charge to $4.4 billion. For now, Boeing expects revenues and pre-tax earnings for the quarter to be $5.6 billion lower. “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”, Boeing said in a press release.
The charge doesn’t include additional costs resulting from the reduced production of the 737. For this Boeing calculates another $1.7 billion for Q2 alone. Earlier this year Boeing reduced its 737-rate in Renton to 42 frames per month. As it expects the MAX to re-enter service in Q4, production should be resumed in full at rate 57 in 2020. Remember that tier 1-supplier Spirit AeroSystems has continued producing 737/MAX fuselages at rate 52 and storing them since April.
However, a return to service of the MAX in Q4 is not guaranteed: “This assumption reflects the company’s best estimate at this time, but actual timing of return to service could differ from this estimate.” It adds: “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.”
In this uncertainty Boeing will announce a revised full-year guidance later on
