Boeing will pay $4.9 billion to airlines that were forced to ground their 737 Max aircraft after two crashes that killed 346 people.
The planes have been grounded since mid-March and federal regulators are not sure when they will be approved to fly again.
The $4.9 billion is an estimate of concessions for airlines who were forced to operate their summer schedules (and perhaps into autumn) without the aircraft. Boeing will compensate customers over the next several years but is taking the charge out of this quarter’s earnings. The manufacturer did not specify which airlines would receive compensation.
“This is not inconsequential, even for a company the size of Boeing,” Scott Hamilton, managing director of the aviation consultancy Leeham Company, told The New York Times.
At one point, it looked like the 737 Max was going to return to service by the end of June but the Federal Aviation Administration announced the discovery of a new issue with the aircraft on June 26.
Boeing believes that the 737 Max will return into service by the end of the year, but it could be later — which could pose a difficulty for holiday-season travel. Earlier this week, American Airlines joined United in canceling all 737 Max flights through November.
“We remain focused on safely returning the 737 MAX to service,” Boeing Chairman, President and CEO Dennis Muilenburg said in a statement. “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.”
The $4.9 billion does not include any prices of potential litigation that may come over the aircraft or the $100 million fund the company announced for families and communities affected by the crash.
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