Nation & World

Boeing doubles projected cost of MAX grounding

Total now hits $18.4 billion

Boeing 737 MAX jets sit parked in Renton, Wash. On Wednesday, Boeing announced a further cut in the production rate of i
Boeing 737 MAX jets sit parked in Renton, Wash. On Wednesday, Boeing announced a further cut in the production rate of its 787 Dreamliner. (Associated Press)

Boeing doubled its projection of the cost of the 737 MAX crisis Wednesday, adding another $9.2 billion in losses, accounting write-offs and estimated higher future production costs.

This brings the total to date to $18.4 billion.

And in more bad news, the company announced a further cut in the production rate of the 787 Dreamliner. Boeing currently produces 14 of those widebody jets per month, seven each in Everett, Wash., and in North Charleston, S.C.

Boeing previously had said that would go down to 12 jets per month in late 2020 due to sluggish near-term demand and a dwindling backlog of orders.

On Wednesday, the company effectively conceded that outlook was optimistic and said it will cut the rate to 10 jets per month in early 2021.

While the rest of the company was profitable, absorbing the MAX hit in 2019 resulted in an overall loss from operations of $2.2 billion in the fourth quarter and a net loss for 2019 of just over $1 billion.

One analyst called it a “kitchen-sink quarter,” suggesting that new CEO Dave Calhoun wants to put all of the company’s negative news out at once.

The MAX grounding’s costs for the quarter include a one-time accounting write-off in the quarter of $2.6 billion related to paying compensation and making concessions to airline customers.

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Boeing also estimated that lower 737 production would add a further $2.6 billion in additional costs, related to the increase in overhead costs as more time is needed to deliver airplanes than planned following the halt in production and the anticipation of a gradual ramp-up over an extended period after production resumes.

And finally Boeing projected another $4 billion that it will absorb as losses in the year ahead, to cover “abnormal production costs to be incurred during the suspension and gradual resumption of production at low production rates.”

Boeing previously had estimated the total cost of the grounding through the end of September at $9.2 billion.

Wednesday’s additional $9.2 billion projection covers the impact from October through the anticipated return of the MAX to service, which Boeing has said it expects by midsummer.

The loss for 2019 doesn’t take into account the $4 billion projection for abnormal costs in 2020.

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