BOEING GETS HIT. The charge, which comes to $8.74 a share, is set to wipe out profits. By Todd Horwitz, Bubba Trading.

Boeing to Take Big Hit

Boeing on Thursday said it will take a $4.9 billion charge in the second quarter due to the worldwide grounding of its 737 Max planes after two fatal crashes that killed 346 people.

The charge, which comes to $8.74 a share, is set to wipe out profits. Analysts expected the company to book a per-share profit of $1.80 for the second quarter, according to average estimates compiled by Refinitiv. The charge would reduce revenue and pre-tax earnings by $5.6 billion in the quarter, Boeing said. The 737 Max jets have been grounded since mid-March and regulators have not said when they expect to allow the planes to fly again.

Boeing shares rose 2% in postmarket trading after the manufacturer disclosed the charge.
The Chicago-based manufacturer said the charge is an estimate of concessions for Max customers who have been left without the fuel-efficient planes during the peak summer travel period and through much of the fall with no end in sight to the grounding. It said it expects to compensate customers over several years but book the entire charge in the second quarter.

Regulators grounded the 737 Max fleets after the second of two fatal crashes within five months of one another. Investigators in the crashes — a Lion Air flight in Indonesia in October and an Ethiopian Airlines flight in March — implicated an automated stall-prevention feature on the jetliners. Boeing has developed a fix for the software, but regulators haven’t yet signed off on it yet.

“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.” It’s unclear when the plane will fly again. Boeing is working on fixing flight-control software implicated in the crashes.

Todd “Bubba” Horwitz

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