Boeing takes $4.9 bln charge for prolonged grounding of 737 MAX planes

Clay Curtis
July 19, 2019

Boeing also said it assumes the 737 MAX return to service in the United States and other countries beginning early in the fourth quarter, though the company cautioned the exact timeline could shift as it has in recent weeks.

Airlines around the world have cancelled thousands of flights since March, when regulators grounded the Boeing 737 Max and the company suspended deliveries of new jets.

"By proactively removing the MAX from scheduled service, we can reduce last-minute flight cancellations and unexpected disruptions to our Customers' travel plans", Southwest said in a press release.

FOX Business' Liz Claman talks to acting FAA administrator Daniel Elwell about the scrutiny facing the Federal Aviation Administration and the two Boeing 737 Max plane crashes. At the time of the Boeing model's worldwide grounding on March 13, 2019, Southwest was the largest US operator of the 737 MAX, having 34 in its fleet.

Boeing plans to gradually step up production once the Max returns to service to ensure that its supply chain isn't unduly stressed. 'This is a defining moment for Boeing.

"The Max grounding presents significant headwinds and the financial impact recognised this quarter reflects the current challenges and helps to address future financial risks". (AAL) and United Airlines Holding (UAL) also have removed the 737 MAX from their flying schedules until early November. "The FAA will lift the aircraft's prohibition order when we deem it is safe to do so".

The latest costs add to the overall financial hit from the crisis.

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Southwest operates 34 Boeing 737 MAX 8 planes and more than half of the flights out of Sacramento International Airport are through Southwest, according to previous reporting by The Bee.

The new costs, which Boeing is announcing the week before it reports earnings, do not include the potential costs of litigation associated with the Max, or the $100 million fund it recently announced for families and communities affected by the two crashes.

But those donations have not silenced critics of the company, including from Paul Njoroge who castigated the company as greedy and reckless before a congressional panel on Wednesday.

"Boeing should not be allowed to act like a mere investment company extracting wealth to super-charge shareholder returns at the expense of safety and quality", said Njoroge, whose wife, three children and mother-in-law died in the March 10 Ethiopian Airlines disaster. A single sensor on the outside of the plane was used by this software, which was implicated in both deadly crashes.

That timing is earlier than some analysts expect, and may have contributed to a rally in Boeing shares in after-hours trading.

WestJet, which owns 13 Boeing Max planes, accounting for seven per cent of its fleet, is just one of many airlines around the world struggling to re-accommodate guests in light of the ongoing grounding of the plane.

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