Going off of this article, I'm going to attempt to calculate what numbers go into (or IMO, should go into) the cost so far for Boeing:
$1.7 Billion (Billion shortened to B after this) added in Q2 2019 + $1B in April, to account for the production rate going from 52/month to 42/month
$5.6B, the hit on Boeing's 2Q pretax earnings and revenue.
Let's try to break down the $5.6B amount:
$100 million ($0.1B
) for the fund for the MAX victims and families, from The Seattle Times
From April to June, building the MAX at 42/month costs Boeing roughly $5.3B
What follows is a pretty crude method used to calculate the production costs above. Current 737-MAX8 list price is ~$120Million. Assuming a 50% discount to sell it, say Boeing gets $60M per plane at delivery. Say Boeing gets about 70% of that, after factoring in revenue to CFM, APU manufacturers, interior manufacturers, and so on. So $42M. For a 3-month production at 42/month, that works out to $42M x (42x3) = $5292M, so about $5.3B. I would welcome any refinements or any links to how much it actually costs Boeing to build a 737 MAX. This also assumes all models produced are MAX 8's, which of course isn't true. So more cost for Boeing to produce the longer MAX 9's and less costs to produce the shorter 7's. But since more 9's are being produced than 7's, I'd expect this to be a conservative estimate, with the figure likely being higher.
Cost of parking grounded aircraft, this Bloomberg link
has an industry veteran estimate the parking cost of one aircraft at $2000/month. For the 126 built since the grounding plus the 387 already delivered (total 513) for a period of 3 months, this is $1 026 000, or ~$1M or $0.001B
. Miniscule in the grand scheme of things. This estimate is also for parking the aircraft at the Mojave desert, which of course is only true for the 34 WN maxes. I'd call this a conservative estimate, since parking it at other airports (LAX, HOU, IAH, MFM, Europe, etc.) for the other operators is likely more expensive.
Compensation to airlines for canceled flights and lost operating profit: the Bloomberg link above estimates this to be about $1.4B through September, say half of that for Q2, so about $0.7B
Added up, these already add up to more than $5.6B. Even if my aircraft production cost is a wild overestimate, there's still other factors to be accounted for, which I cannot put a dollar amount to, including but not limited to:
- Compensation to airlines for leasing or financing costs for the already-delivered MAXes. I assume financiers will continue seeking payment from airlines despite the grounding for frames already delivered. On the other hand, I assume it saves would-be operators of the currently undelivered but produced airframes some money to not have to pay Boeing for progress payments and delivery.
- MAX redesign/software update, rollout of redesign/update into already produced airframes, and recertification costs. Note that here, I don't assume the MAX will need a new type certificate, I just mean the costs to carry out additional testing and certification steps.
- Potential compensation to WN if pilot sim training is needed.
What else am I missing? After doing this analysis, it seems like $5.6B is too low of a charge for this whole debaucle....