Cost of the Boeing 737 grounding tops $1bn – The Wall Street Journal

DUBLIN — In the wake of the Lion Air and Ethiopian Airlines crashes, the world decided that enough was enough and grounded the Boeing 737 MAX 8. It took US authorities and Boeing a little longer to admit that there were problems with the bestseller plane. But now, as Boeing continues to work on fixes to the system that appears to have precipitated both crashes, the costs of Boeing's apparent errors is starting to mount. So far, the company estimates that the grounding has come with a $1 billion price tag, and that number looks set to grow. All in all, Boeing has not handled the 737 drama well. It was slow to respond to events and has consistently denied that there are any problems even as it works to fix them. The company's policy of charging extra for safety features has also made it look like an organisation that doesn't care enough about safety. Hopefully, by hitting it where it hurts – in the wallet – the 737 saga will encourage the company to reconsider its processes and approach. – Felicity Duncan.Boeing says 737 MAX grounding will cost more than $1bn.By Doug Cameron.Boeing said it would take an initial hit of more than $1bn on the global grounding of the 737 MAX and suspended full-year financial guidance, providing a first look at the financial damage from two fatal crashes of its best-selling plane..___STEADY_PAYWALL___.The initial charge includes $1 billion to cover Boeing's estimate for higher plane-production expenses spread over the life of the MAX program, as well as unspecified costs to fix flight-control software implicated in the accidents and additional pilot training as part of efforts to return the aircraft to service. Boeing's shares rose 1.4% in pre-open trade on Wednesday, reversing an earlier decline as it reported first-quarter earnings of $2.15bn..The grounding of the MAX, securing regulatory approval for a software fix and winning back the confidence of customers and flyers have become the biggest challenge to Boeing since regulators grounded the global 787 Dreamliner fleet in 2013 following a spate of onboard battery fires that led to no injuries. The two 737 MAX crashes killed all 346 people on board..The profit demonstrated the resilience of Boeing's broader portfolio, with sales of 787s and other jetliners as well as services and military hardware limiting the drop in free cash flow..However, the company said it would suspend the huge share buybacks that have propelled its share price over the past three years and dropped full-year profit and sales guidance for 2019. Investors have cut some $27bn off Boeing's market value since the Ethiopian Airlines crash, valuing the company at $212bn..Boeing's initial estimate of for tackling the MAX crisis compares with analysts estimates running as high as $3bn, including payouts to families of passengers killed in the twin crashes as well as airlines and suppliers..The suspension of buybacks in mid-March and shelving of 2019 financial guidance marks a sharp reversal from the optimism displayed by Boeing executives in January when they set plans to deliver more than 900 jetliners this year alongside higher sales and profits..It has amassed more than 5,000 orders for the single-aisle MAX and planned to boost monthly production by five planes to 57 this summer, which analysts expected to account for more than 40% of annual sales and profits..Instead, it has cut output to 42 a month, leaving planes to pile up around its Seattle-area assembly plants as the global grounding left it unable to deliver new planes. Boeing didn't book any commercial orders for a 737 in March, the first month without such a sale in almost seven years..The lower output means Boeing will likely cede its title as the world's biggest plane maker to European rival Airbus SE at the end of this year..Regulators have grounded the 737 MAX world-wide until regulators sign off on a software fix that Boeing is preparing for the system that investigators believe contributed to both crashes..More than 370 MAX planes had already been delivered, forcing carriers including Southwest Airlines Co. – which reports quarterly earnings on Thursday – to cancel flights and reconfigure schedules ahead of the busy summer travel season..Southwest has canceled MAX flights through early August. American Airlines Group Inc. has cancelled MAX flights through Aug. 19..The company reported profits of $2.15bn for the quarter compared with $2.48bn a year earlier, with sales dipping 2% to $22.92bn..Write to Doug Cameron at doug.cameron@wsj.com

Cost of the Boeing 737 grounding tops $1bn – The Wall Street Journal

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