Boeing announces $4.9 billion charge related to 737 Max jets grounding
Nearly a week ahead of Boeing’s second-quarter earnings release, the company on Thursday announced that it would take a $4.9 billion charge related to the grounding of 737 Max jets.
The multibillion-dollar after-tax charge is “in connection with an estimate of potential concessions and other considerations” to airlines affected by the situation surrounding the aircraft, according to a news release from Boeing. As a result, "a $5.6 billion reduction in revenue and pre-tax earnings" will show for the quarter.
“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.
The FAA pulled the 737 Max jets in March following the deadly Lion Air and Ethiopian Airlines crashes. Since then, various airlines have canceled flights that had booked the Boeing 737 Max. The company has also suspended deliveries of new jets.
Boeing also projected a $1.7 billion spike in the second quarter for the price tag associated with producing the 737 Max because production will be reduced longer than expected, according to the news release.
"We remain focused on safely returning the 737 MAX to service," Boeing Chairman, President and CEO Dennis Muilenburg said. "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."
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It's unclear when the plane will fly again. Boeing is working on fixing flight-control software implicated in the crashes.
FOX Business’ Matt Kazin, Fox News’ Nicole Darrah and The Associated Press contributed to this report.