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william
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Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 8:47 pm

https://www.nytimes.com/2019/07/18/busi ... harge.html

Boeing said on Thursday that it would take a $5.6 billion charge in the quarter as it reels from the prolonged grounding of its 737 Max.

That figure represents Boeing’s current estimate of how much it will have to pay airlines that fly the Max, which has been grounded for months after two deadly crashes, and may not fly again this year.

Boeing also said it was anticipating an additional $1.7 billion in costs associated with the production of the Max, which has had a factory slowdown. Those costs will be spread out over years, and will depress the overall profitability of the Max program.
 
mxaxai
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 8:51 pm

oof

That's a big hit that may not be available to finance NMA development.
 
Canuck600
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 8:56 pm

I don't know what the rules are in the states as far as transferring money from one division of a company to another. Could Boeing Corporation use money from say Boeing Defense to minimize the loses at Boeing Commercial Aircraft?
 
BoeingGuy
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 8:58 pm

This is very typical of Boeing over the past 25 years. Gotta cut costs to the bone up front. Then it costs 1000x more later - 787, KC-46, 737 Max.

Never enough money to do it right, but always lots more money later to fix the mess. Unfortunately the 737 Max cost more than late deliveries.

They never learn as long as the leaders who foster this culture walk away with their pockets lined with money.
 
BoeingGuy
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 9:00 pm

mxaxai wrote:
oof

That's a big hit that may not be available to finance NMA development.


The NMA will happen. You can bet on it.
 
icareflies
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 9:01 pm

I don't know what the rules are in the states as far as transferring money from one division of a company to another. Could Boeing Corporation use money from say Boeing Defense to minimize the loses at Boeing Commercial Aircraft?

Commercial and Defense Business unit are part of the same company at Boeing so it is same cash pocket.
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Kindanew
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 9:08 pm

mxaxai wrote:
oof

That's a big hit that may not be available to finance NMA development.


Its ok. They will lobby even harder for tax breaks.
 
BoeingGuy
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 9:13 pm

Kindanew wrote:
mxaxai wrote:
oof

That's a big hit that may not be available to finance NMA development.


Its ok. They will lobby even harder for tax breaks.


They already made up for some of the mismanaged 787 losses by cutting employee pensions. (Not for Jim McNerney though.)

I’m sure they’ll recoup some cost by making the employees pay for this mismanagement too.
 
mxaxai
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 9:15 pm

BoeingGuy wrote:
mxaxai wrote:
oof

That's a big hit that may not be available to finance NMA development.


The NMA will happen. You can bet on it.

I have no doubt but 5.6 billion can pay for a lot of extra R&D.
 
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hOMSaR
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 9:28 pm

icareflies wrote:
I don't know what the rules are in the states as far as transferring money from one division of a company to another. Could Boeing Corporation use money from say Boeing Defense to minimize the loses at Boeing Commercial Aircraft?

Commercial and Defense Business unit are part of the same company at Boeing so it is same cash pocket.


There’s no law against it. If it is all the same company, they can allocate money as they wish. However, it won’t “minimize the losses” because profits/losses are based on changes to book value, not cash flow. So, Boeing still has to take a $7.3 billion hit (apparently an immediate $5.6 billion write-down associated with new liabilities/reduced value of existing contracts that they already accounted for; plus $1.7 billion in future costs that they’ll have to charge against). This does not mean that they just sent $5.6 billion in cash out the door. It could mean that they have just accumulated $5.6 billion worth of penalties to airlines (and perhaps suppliers, and likely the costs of payments to the families of the victims is in this number as well) because of delays associated with the grounding. The actual cash out the door may still take years, and, in the case of airlines, may not even be cash payments, but rather new credits towards future airplane and parts purchases (but it still counts as a liability Boeing incurred in the last quarter, so it has to be reflected on their books).
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 9:39 pm

william wrote:
That figure represents Boeing’s current estimate of how much it will have to pay airlines that fly the Max, which has been grounded for months after two deadly crashes, and may not fly again this year.


I'd be very surprised if that figure doesn't grow significantly.

Canuck600 wrote:
I don't know what the rules are in the states as far as transferring money from one division of a company to another. Could Boeing Corporation use money from say Boeing Defense to minimize the loses at Boeing Commercial Aircraft?


It's all one company, doesn't make any difference.
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 9:41 pm

hOMSaR wrote:
icareflies wrote:
I don't know what the rules are in the states as far as transferring money from one division of a company to another. Could Boeing Corporation use money from say Boeing Defense to minimize the loses at Boeing Commercial Aircraft?

Commercial and Defense Business unit are part of the same company at Boeing so it is same cash pocket.


There’s no law against it. If it is all the same company, they can allocate money as they wish. However, it won’t “minimize the losses” because profits/losses are based on changes to book value, not cash flow. So, Boeing still has to take a $7.3 billion hit (apparently an immediate $5.6 billion write-down associated with new liabilities/reduced value of existing contracts that they already accounted for; plus $1.7 billion in future costs that they’ll have to charge against). This does not mean that they just sent $5.6 billion in cash out the door. It could mean that they have just accumulated $5.6 billion worth of penalties to airlines (and perhaps suppliers, and likely the costs of payments to the families of the victims is in this number as well) because of delays associated with the grounding. The actual cash out the door may still take years, and, in the case of airlines, may not even be cash payments, but rather new credits towards future airplane and parts purchases (but it still counts as a liability Boeing incurred in the last quarter, so it has to be reflected on their books).


Good explanation. Basically they have to put it on the books because it has become a liability. The actual cash won't come out until the future. Some of the compensation to airlines may be discounting future deliveries so the cash never goes out, they just take in less.
 
IWMBH
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 9:42 pm

This is going to roll some heads in the top-management, but nothing more than that. 5,6 billion is a setback but nothing more for a company with the size and the significance of Boeing.
 
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 9:48 pm

mxaxai wrote:
BoeingGuy wrote:
mxaxai wrote:
oof

That's a big hit that may not be available to finance NMA development.


The NMA will happen. You can bet on it.

I have no doubt but 5.6 billion can pay for a lot of extra R&D.


That’s okay because Jim McSlimeball dismantled a lot of the productive R&D organizations in the Puget Sound and moved them out of state with inexperienced employees to save a little bit of money.
 
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 9:51 pm

At what point are profits wiped out for the entire 737 program? Does anyone know how much that program has made? Although its been high volume for years, margins were probably a lot less than for widebodies.
 
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 9:53 pm

and somehow Mulienberg will get a big bonus.....
 
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 9:58 pm

Kindanew wrote:
mxaxai wrote:
oof

That's a big hit that may not be available to finance NMA development.


Its ok. They will lobby even harder for tax breaks.


Maybe they should ask for "repayable loans."
 
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 10:06 pm

william wrote:
https://www.nytimes.com/2019/07/18/business/boeing-737-charge.html

Boeing said on Thursday that it would take a $5.6 billion charge in the quarter as it reels from the prolonged grounding of its 737 Max.

That figure represents Boeing’s current estimate of how much it will have to pay airlines that fly the Max, which has been grounded for months after two deadly crashes, and may not fly again this year.

Boeing also said it was anticipating an additional $1.7 billion in costs associated with the production of the Max, which has had a factory slowdown. Those costs will be spread out over years, and will depress the overall profitability of the Max program.


So Boeing taking a 1bn a month isn't a bad estimate. Still, a lot of money wasted.

Is this just for the last quarter, or is this the estimated loss till the mess is over.
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 10:13 pm

phlswaflyer wrote:
and somehow Mulienberg will get a big bonus.....


I figure at this rate employees will owe the company money around bonus time...
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LDRA
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 10:15 pm

The charge is much less than expected. Boeing stock is doing ok, only down a little bit
 
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 10:31 pm

That’s not as bad as it may sound. I’m not denying that it is an eye watering amount of money, but BellSouth took multiple hits of over a billion just for restructuring about 20 years ago. What they do is take a loss on the books upfront and then reduce the accrual as they pay out the penalties in whatever form. When everything has settled out, they will show any balance as a profit or any additional costs as an additional charge. As of now, they haven’t reduced their cash for this, but they have greatly reduced their tax liability.
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 10:38 pm

nikeherc wrote:
That’s not as bad as it may sound. I’m not denying that it is an eye watering amount of money, but BellSouth took multiple hits of over a billion just for restructuring about 20 years ago. What they do is take a loss on the books upfront and then reduce the accrual as they pay out the penalties in whatever form. When everything has settled out, they will show any balance as a profit or any additional costs as an additional charge. As of now, they haven’t reduced their cash for this, but they have greatly reduced their tax liability.

The markets seem to agree:

Boeing shares rose 2 percent in aftermarket trading, a sign that investors were comfortable with the size of the initial charge, disclosed less than a week before the company plans to release financial results on July 24.

Ref: https://www.reuters.com/article/us-boei ... SKCN1UD30K
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 10:53 pm

So is 5.6 bil enough if they creatively add the deferred 787 cost for Boeing to go chpt.11, wipe out investors who are already sitting pretty with all the buy backs, get new investors - no shortage of willing participants, reduce other expenses so that when they emerge the company will be re-capitalized allowing them to be competitive with Airbus?
 
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 11:00 pm

par13del wrote:
So is 5.6 bil enough if they creatively add the deferred 787 cost for Boeing to go chpt.11, wipe out investors who are already sitting pretty with all the buy backs, get new investors - no shortage of willing participants, reduce other expenses so that when they emerge the company will be re-capitalized allowing them to be competitive with Airbus?

Can I have some of whatever you’re on?
Look at sweatpants guy. This is a 90 million dollar aircraft, not a Tallahassee strip club
 
N649DL
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 11:13 pm

Serves them right. Boeing chose to show a lack of transparency (and even now they are still sketch about taking ownership) about key software programs on the MAX (and after swatting away warnings issued by AA pilots as well.) They also chose to quickly react to Airbus's 321 NEO design by essentially creating a carbon copy of the 737-900ER with new engines and wing extensions. I'm still surprised so many airlines purchased the MAX as the NEO looks superior.
 
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 11:14 pm

par13del wrote:
So is 5.6 bil enough if they creatively add the deferred 787 cost for Boeing to go chpt.11, wipe out investors who are already sitting pretty with all the buy backs, get new investors - no shortage of willing participants, reduce other expenses so that when they emerge the company will be re-capitalized allowing them to be competitive with Airbus?


Yeah.. no. Are you insane?
 
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 11:15 pm

ScottB wrote:
Kindanew wrote:
mxaxai wrote:
oof

That's a big hit that may not be available to finance NMA development.


Its ok. They will lobby even harder for tax breaks.


Maybe they should ask for "repayable loans."


Good one. Maybe NMA 'launch aid.'
 
SEU
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 11:25 pm

Does this include the 4.9 billion order from Garuda Indonesia that was cancelled? or is this just costs in general, so its 4.9billion on top of the 5.6billion?
 
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Thu Jul 18, 2019 11:36 pm

ScottB wrote:
Kindanew wrote:
mxaxai wrote:
oof

That's a big hit that may not be available to finance NMA development.


Its ok. They will lobby even harder for tax breaks.


Maybe they should ask for "repayable loans."


The word Loan denotes that a sum is intended to be replayed.

I believe the main issue Boeing has with Airbus launch aid is the low level of interest.
 
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par13del
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 12:03 am

ethernal wrote:
par13del wrote:
So is 5.6 bil enough if they creatively add the deferred 787 cost for Boeing to go chpt.11, wipe out investors who are already sitting pretty with all the buy backs, get new investors - no shortage of willing participants, reduce other expenses so that when they emerge the company will be re-capitalized allowing them to be competitive with Airbus?


Yeah.. no. Are you insane?

You wanna explain GE and the others, etc?
 
Scotron12
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 12:34 am

So what? Boeing can do what they do best...sue!
 
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par13del
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 12:42 am

Kindanew wrote:
ScottB wrote:
Kindanew wrote:

Its ok. They will lobby even harder for tax breaks.


Maybe they should ask for "repayable loans."


The word Loan denotes that a sum is intended to be replayed.

I believe the main issue Boeing has with Airbus launch aid is the low level of interest.

Ah no, in the A380 closing thread we had Airbus and RLI experts inform us that RLI is by risk sharing partners, so if the A380 is cancelled before paying off the loan, the lost payments was their risk....so I am going with the experts.
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 1:27 am

nikeherc wrote:
That’s not as bad as it may sound. I’m not denying that it is an eye watering amount of money, but BellSouth took multiple hits of over a billion just for restructuring about 20 years ago. What they do is take a loss on the books upfront and then reduce the accrual as they pay out the penalties in whatever form. When everything has settled out, they will show any balance as a profit or any additional costs as an additional charge. As of now, they haven’t reduced their cash for this, but they have greatly reduced their tax liability.


Finally, someone who has a working knowledge of accounting.
 
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 1:29 am

mxaxai wrote:
BoeingGuy wrote:
mxaxai wrote:
oof

That's a big hit that may not be available to finance NMA development.


The NMA will happen. You can bet on it.

I have no doubt but 5.6 billion can pay for a lot of extra R&D.


Choice 1: divert more cash-flow to an innovative & new 757/767 and/or 737 replacement.

Choice 2: Keep steady or increase stock buybacks!

I know which is better for the longevity of the business... but $ talks, especially for those in it for the short-medium haul.
 
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 1:37 am

SEU wrote:
Does this include the 4.9 billion order from Garuda Indonesia that was cancelled? or is this just costs in general, so its 4.9billion on top of the 5.6billion?
Er, no.
The $4.9billion Garuda order would have yielded a theoretical profit at some future date as each individual aircraft was delivered, but only a fraction of that headline amount would be actual profit (e.g. maybe $490million)
Also Boeing haven't necessarily "lost" this $490million potential future profit, because another customer might will step in at some point and take these frames.
Or more likely, a customer who was originally waiting until 2023 for delivery now finds themselves offered an earlier slot in 2020, meaning that they will have to come up with the $$$ in 2020.
Boeing will get that $4.9billion from somebody at some point, just not from Garuda.
A decade down the road when the 737 program finally ends, a.netters might argue that the final figures for 737 production could be 50 higher if Garuda hadn't got cold feet.
But it's all rather vague unless you find yourself one day with a real physical aircraft sitting at Renton all ready to be painted up in Garuda colors, but with nowhere to go. Except that will never happen.

The $5.6billion is different because it is a real assessment of real (& expected) losses up to this point in time.
Another way of looking at it is to view it as the profit Boeing would make if tomorrow they sold 560 737 MAXs to a new customer.(assuming a nominal $100 million price tag on each a/c, and 10% profit margin.)
Nothing to see here; move along please.
 
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 1:54 am

nikeherc wrote:
That’s not as bad as it may sound. I’m not denying that it is an eye watering amount of money, but BellSouth took multiple hits of over a billion just for restructuring about 20 years ago. What they do is take a loss on the books upfront and then reduce the accrual as they pay out the penalties in whatever form. When everything has settled out, they will show any balance as a profit or any additional costs as an additional charge. As of now, they haven’t reduced their cash for this, but they have greatly reduced their tax liability.


So everyone wins at Boeing, except the workers who will have benefits cut because losses were made, and tax payers who will have to pony up the money lost from the taxes that would have been brought in. Failing upwards is always a winner.
 
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 2:07 am

enzo011 wrote:
nikeherc wrote:
That’s not as bad as it may sound. I’m not denying that it is an eye watering amount of money, but BellSouth took multiple hits of over a billion just for restructuring about 20 years ago. What they do is take a loss on the books upfront and then reduce the accrual as they pay out the penalties in whatever form. When everything has settled out, they will show any balance as a profit or any additional costs as an additional charge. As of now, they haven’t reduced their cash for this, but they have greatly reduced their tax liability.


So everyone wins at Boeing, except the workers who will have benefits cut because losses were made, and tax payers who will have to pony up the money lost from the taxes that would have been brought in. Failing upwards is always a winner.


And Jim McNerney will still be getting his $3.6 Million a year pension after doing irreparable damage to the company and cutting everyone else’s retirement benefits.
 
dmg626
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 2:08 am

Cut more engineering positions, don’t need those senior guys anyways. More outsourcing is the way to go! Step up recruiting in Chennai
 
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gatibosgru
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 2:33 am

$5.6b actually doesn't sound that bad.
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RickNRoll
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 2:58 am

BoeingGuy wrote:
This is very typical of Boeing over the past 25 years. Gotta cut costs to the bone up front. Then it costs 1000x more later - 787, KC-46, 737 Max.

Never enough money to do it right, but always lots more money later to fix the mess. Unfortunately the 737 Max cost more than late deliveries.

They never learn as long as the leaders who foster this culture walk away with their pockets lined with money.
They have got their bonuses locked up in their bank accounts already. I have been reading about the anger felt towards previous Boeing leadership but it is only this event that has really made me realise why. The average professional puts a lot of themselves into their job. It can be heartbreaking to see that dedication betrayed by craven greed.
 
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 3:53 am

Revelation wrote:
nikeherc wrote:
That’s not as bad as it may sound. I’m not denying that it is an eye watering amount of money, but BellSouth took multiple hits of over a billion just for restructuring about 20 years ago. What they do is take a loss on the books upfront and then reduce the accrual as they pay out the penalties in whatever form. When everything has settled out, they will show any balance as a profit or any additional costs as an additional charge. As of now, they haven’t reduced their cash for this, but they have greatly reduced their tax liability.

The markets seem to agree:

Boeing shares rose 2 percent in aftermarket trading, a sign that investors were comfortable with the size of the initial charge, disclosed less than a week before the company plans to release financial results on July 24.

Ref: https://www.reuters.com/article/us-boei ... SKCN1UD30K

I for one an avgeek with no bias to A or B wish that a guy with your smarts and pen could contribute more without wearing the Boeing lenses. “Markets seem to agree” as in the charge was already priced in or they are expecting the worse is behind as stock market prices reflect the future earnings as opposed to present. However everyone likes to sugar coat the max issue, Boeing made some big executive mistakes -which unfortunately led to loss of lives- with their hide it under the carpet attitude. The issue is deeper than a management mistake, but something that requires a culture change from top to bottom for it not to repeat in the future. Please do not take this post as a personal attack it is not, I value your opinion and contribution a lot, but I just at least cleary see that your scale of justice is broken when it comes to similar issues at both manufacturers.
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 4:35 am

N649DL wrote:
Serves them right.


Yeah, except I have a feeling the taxpayer will end up footing the bill somehow...
These companies never ever pay for what they do. Lobbies, bailouts, etc. TBTF also means 'no punishment'.
Ref.: GFC...
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 4:45 am

scbriml wrote:
william wrote:
That figure represents Boeing’s current estimate of how much it will have to pay airlines that fly the Max, which has been grounded for months after two deadly crashes, and may not fly again this year.


I'd be very surprised if that figure doesn't grow significantly.


It most certainly will be double or even triple by early next year. With MAX groundings basically going into 2020, there will be massive financial losses due to compensating airlines for loss of revenue, storage of current built MAX planes, updates and training, payouts to victims of crashes, etc etc. I imagine it will wipe out profits until at least 2021.
 
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 4:47 am

gatibosgru wrote:
$5.6b actually doesn't sound that bad.

The article refers to USD5.6 plus a further USD 1.7 to be spread over future accounting periods. I am not challenging that it doesn't sound too bad, but just clarifying the actual cost announced.
 
9Patch
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 4:47 am

ScottB wrote:
Kindanew wrote:
mxaxai wrote:
oof

That's a big hit that may not be available to finance NMA development.


Its ok. They will lobby even harder for tax breaks.


Maybe they should ask for "repayable loans."

That don't have to be repaid.
 
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piedmontf284000
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 4:56 am

gatibosgru wrote:
$5.6b actually doesn't sound that bad.


That was just for the 2nd quarter, which is April, May, and June (Q2). The plane has only been grounded since March.
 
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Finn350
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 5:09 am

SteelChair wrote:
At what point are profits wiped out for the entire 737 program? Does anyone know how much that program has made? Although its been high volume for years, margins were probably a lot less than for widebodies.


Boeing Commercial Airplanes Unit yearly earnings (profits) of (about $8 billion in an average year) exceeds the proposed charge for the 737 MAX disruptions, so in a big picture the charge is insignificant.
 
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LaunchDetected
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 5:49 am

There is not a lot of sectors where you can fail this hard (not delivering your main product during a whole year) with so few consequences on your future.
Caravelle lover
 
SEU
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 7:01 am

SheikhDjibouti wrote:
SEU wrote:
Does this include the 4.9 billion order from Garuda Indonesia that was cancelled? or is this just costs in general, so its 4.9billion on top of the 5.6billion?
Er, no.
The $4.9billion Garuda order would have yielded a theoretical profit at some future date as each individual aircraft was delivered, but only a fraction of that headline amount would be actual profit (e.g. maybe $490million)
Also Boeing haven't necessarily "lost" this $490million potential future profit, because another customer might will step in at some point and take these frames.
Or more likely, a customer who was originally waiting until 2023 for delivery now finds themselves offered an earlier slot in 2020, meaning that they will have to come up with the $$$ in 2020.
Boeing will get that $4.9billion from somebody at some point, just not from Garuda.
A decade down the road when the 737 program finally ends, a.netters might argue that the final figures for 737 production could be 50 higher if Garuda hadn't got cold feet.
But it's all rather vague unless you find yourself one day with a real physical aircraft sitting at Renton all ready to be painted up in Garuda colors, but with nowhere to go. Except that will never happen.

The $5.6billion is different because it is a real assessment of real (& expected) losses up to this point in time.
Another way of looking at it is to view it as the profit Boeing would make if tomorrow they sold 560 737 MAXs to a new customer.(assuming a nominal $100 million price tag on each a/c, and 10% profit margin.)


Well I understand the technicalities, you are just talking about cash flow. They were going to get 4.9billion, now they are not. Its a loss of 4.9billion.
 
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Re: Boeing Expects a $5.6 Billion Hit for 737 Max Disruptions

Fri Jul 19, 2019 7:02 am

majano wrote:
gatibosgru wrote:
$5.6b actually doesn't sound that bad.

The article refers to USD5.6 plus a further USD 1.7 to be spread over future accounting periods. I am not challenging that it doesn't sound too bad, but just clarifying the actual cost announced.


That's 7.2 billion in total. The A350 development cost was 12.38 billions according to Wikipedia. I would say that more than half of the A350 development cost is quite much.

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