Lola Evans
21 Jul 2019, 21:15 GMT+10
CHICAGO, Illinois - Boeing says it will take an after-tax hit of $4.9 billion, or $8.74 per share, over the grounding of its 737 MAX planes.
The write-off will be taken up in the company's second quarter accounts to be released next Wednesday 24 July 2019.
The hit will impact revenue as well as after-tax earnings.
The impairment, the company says, addresses an estimate of potential concessions and other considerations to customers for disruptions related to the 737 MAX groundings and associated delivery delays.
While the entire estimated amount will be recognized as a charge in the second quarter, the company says it expects any potential concessions or other considerations to be provided over a number of years and take various forms of economic value.
Additionally, Boeing's estimated costs to produce the aircraft in the 737 accounting quantity increased by $1.7 billion in the second quarter, primarily due to higher costs associated with a longer than expected reduction in the production rate. The increased 737 program costs will reduce the margin of the 737 program in the second quarter and in future quarters, a company statement said.
Boeing says it continues to work with civil aviation authorities to ensure the 737 MAX's safe return to service, and these authorities will determine the timing of return to service. For purposes of the second-quarter financial results, the company says it has assumed that regulatory approval of 737 MAX return to service in the U.S. and other jurisdictions begins early in the fourth quarter 2019. This assumption reflects the company's best estimate at this time, but actual timing of return to service could differ from this estimate. The second-quarter financial results will further assume a gradual increase in the 737 production rate from 42 per month to 57 per month in 2020, and that 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, the company warned.
"We remain focused on safely returning the 737 MAX to service," Boeing Chairman, President and CEO Dennis Muilenburg said Thursday. "This is a defining moment for Boeing. 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 Chief Financial Officer and Executive Vice President of Enterprise Performance and Strategy Greg Smith added, "We are taking appropriate steps to manage our liquidity and increase our balance sheet flexibility the best way possible as we are working through these challenges. Our multi-year 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."
Get a daily dose of Taiwan Sun news through our daily email, its complimentary and keeps you fully up to date with world and business news as well.
Publish news of your business, community or sports group, personnel appointments, major event and more by submitting a news release to Taiwan Sun.
More InformationSYDNEY, Australia - Stocks roared in Asia following record-breaking gains in New York overnight.Taking global markets by surprise was the ...
NEW YORK, New York - U.S. stocks hit record highs on Thursday as reports circulated that the U.S. and China ...
BEIJING - China's Foreign Ministry, when asked about the trade deal with the United States, said it is committed to ...
LONDON - Prime Minister Boris Johnson's Conservative Party has won a solid majority of seats in Britain's Parliament - a ...
WASHINGTON - The Trump administration and China are close to finalizing a modest trade agreement that would suspend tariffs that ...
Mumbai (Maharashtra) [India], Dec 13 (ANI): Equity benchmark indices ruled higher during early hours on Friday following reports that the ...
LONDON - Prime Minister Boris Johnson's Conservative Party will win an overwhelming victory in Britain's election with a majority of ...
BETHLEHEM, Palestinian territories - Israel announced Thursday that Christians in the Gaza Strip will be barred from visiting Holy cities ...
NIAMEY, Niger - At least 71 soldiers were killed and twelve others sustained injuries in a deadly terror attack that ...
BAGHDAD, Iraq - As protests in Iraq enter their third month, the numbers of arrests, abductions, and killings of protesters ...
SYDNEY, Australia - Two Australian schoolboys severely injured in the White Island volcano eruption in New Zealand on Monday have ...
WASHINGTON, DC - An executive order issued by President Donald Trump interpreting members of the Jewish religion as part of ...