Boeing announced that it is taking a $5 billion hit as its crisis following two crashes by its 737 Max planes continues, warning that amount could climb if the planes stay grounded longer than it expects.
It announced on Thursday that it plans to take a $4.9 billion accounting charge over the disruption caused by the planes being grounded around the world, which has led to demands of compensation from airlines and slowed production of the jets by Boeing.
This will mean a $5.6 billion reduction in Boeing's revenue and pre-tax earnings in the second quarter, the company said.
And Boeing also said that it expects $1.7 billion in additional costs in the second quarter related to rising costs for the production of the 737 due to its slowed production rate.
Boeing also said that it expects the plane to return in the last three months of 2019, despite industry fears that the jet may not return to service until 2020. Some in the industry are worried about further delays after regulators discovered new issues with the plane that could push back the date of its recertification even further.
Boeing noted uncertainty about the timing of the plane's return and said that this return date was an "estimate" that could change. It said the hit to profits could change if the return date does.
The aviation giant has cut the production of the planes from 52 a month to 42 a month, and has been forced to delay the delivery of the planes to customers, leaving them clogging up fields and even an employee car park at Boeing's Renton, Washington headquarters.
Airlines are seeking compensation for these delayed deliveries as well as the months of flights they have had to cancel as the 737 Max remains out of the sky.
Airlines like Southwest and United have cancelled flights until November, and some airlines have indicated that they may have to extend cancellations further, and could disrupt holiday season travel.
The two 737 Max crashes, which killed 346 people, started a major crisis for Boeing that has now bled into the wider aviation industry.
The way planes are built, certified, and regulated have all come under renewed scrutiny in federal and Congressional investigations since the crisis began.
Boeing also faces lawsuits from shareholders, pilots, and from the families of victims around the world, which further threaten its reputation and deepen the financial impact of the crisis on one of America's largest companies.
Boeing CEO Dennis Muilenburg said on Thursday: "We remain focused on safely returning the 737 MAX to service."
"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."
Boeing is releasing its full second-quarter earnings on July 24, and will further discuss the impact of the 737 Max's grounding.
- Read more about Boeing's 737 Max crisis:
- Boeing is crowding its employee parking lot with undelivered 737 Max jets, and the company says that's part of its 'inventory-management plan'
