Boeing Forecasts Initial $1 Billion Hit From 737 MAX Troubles--2nd Update

By Doug Cameron 

Boeing Co. said it would take an initial hit of more than $1 billion on the global grounding of the 737 MAX jetliner following two fatal crashes as the plane maker suspended full-year financial guidance.

The initial charge covers Boeing's estimate for higher plane production expenses and costs to fix flight-control software implicated in the accidents and provide additional pilot training as part of the effort to return the aircraft to service.

Boeing faces its biggest challenge since regulators grounded the global 787 Dreamliner fleet in 2013, and analysts estimate the MAX crisis could cost as much as $3 billion after payouts to families of passengers killed in the twin crashes as well as airlines and suppliers.

Its shares fell less than 1% in pre-open trade, with analysts focused on management commentary about the MAX on an upcoming call.

Boeing provided the cost estimate alongside first-quarter earnings of $2.15 billion that also displayed the resilience of its broader portfolio, with sales of 787s and other jetliners as well as services and military hardware keeping cash flow positive.

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.

The moves mark a sharp reversal from the optimism displayed by Boeing executives in January when they unveiled 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 plane 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.

More than 370 had already been delivered, forcing carriers including Southwest Airlines Co. -- which reports Thursday -- to cancel flights and rejigger schedules ahead of the busy summer travel season.

Southwest has already canceled MAX flights through early August. It remains unclear when the MAX will be authorized by regulators to fly again, allowing Boeing to resume deliveries, when the bulk of plane payments are made.

The company reported profits of $2.15 billion for the quarter compared with $2.48 billion a year earlier, with sales dipping to $22.92 billion.

Write to Doug Cameron at [e-mail]

(END) Dow Jones Newswires

April 24, 2019 08:17 ET (12:17 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.