Cost of Boeing 737 MAX Grounding: $5 Billion

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The Boeing Company has to accept billions in special costs in its balance sheet owing to the 737 MAX crisis. In the second quarter, an additional burden of US$4.9 billion after taxes will be incurred, the company announced on Thursday after the close of the U.S. stock market.

The 737 MAX series has been grounded since March, worldwide, after two fatal crashes. According to Boeing, the money will be used for potential compensation payable to airlines affected by operational disruptions and delivery delays due to the suspension of the 737 MAX.

Although the group intends to book all of the special costs in the second quarter, the possible compensation to the airlines will be spread over several years.

In addition, the aircraft manufacturer announced that the production costs of the entire 737 program are likely to have risen by around US$1.7 billion in the second quarter. This is principally because the production rate has had to be reduced for a longer period than planned. These increased costs will continue to weigh on profit margins.

It is currently unclear when Boeing’s 737 MAX series will be cleared to fly again. It recently became known that Eric Lindblad, the Boeing manager responsible for the aircraft program, will retire after less than a year in office.