FAST FIVE: Boeing Takes $4.9 Billion Charge As 737 Max Fiasco Drags On, Stock Jumps
There is just one problem: there is no assurance Boeing's 737 MAX woes will end in Q2, with media reports suggesting the grounding of the jet may last into 2020.
That scenario is not being contemplated by the world's largest commercial aircraft manufacturer, which said it assumes regulatory approval will be granted for the Max to return to global skies in the fourth quarter of this year.
As the FT notes, “concessions in such circumstances often take the form of price cuts on aircraft orders rather than cash payments.” More importantly, and the reason why the company finds itself in this spot, Boeing said it is raising its estimated costs to produce the aircraft by $1.7bn in the second quarter, primarily due to higher costs associated with a reduced production rate (and hopefully with safety equipment that is sold as standard instead of options).
Addressing Boeing's shareholders, CEO Dennis Muilenburg said that “we remain focused on safely returning the 737 Max to service.
Our multiyear 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 suspended financial guidance after the grounding and said it will issue new guidance in future, but for now investors liked the fact that over half a billion dollars would be paid out, sending Boeing stock higher after hours.