July 18, 2019 / 8:44 PM / 5 months ago

UPDATE 2-Boeing takes $4.9 bln charge related to 737 MAX

(Adds details on financial impact)

By Eric M. Johnson

SEATTLE, July 18 (Reuters) - Boeing said on Thursday it would take an after-tax charge of $4.9 billion in the second quarter related to estimated disruptions from the grounding of its money-spinning 737 MAX after two deadly crashes.

The charge will result in a $5.6 billion reduction in revenue and pre-tax earnings in the second quarter, the world's largest planemaker said in a statement less than a week before it plans to release financial results on July 24.

Boeing is facing one of the worst crises in its history as its fastest-selling jetliner, the 737 MAX, remains grounded after crashes in Ethiopia and Indonesia that together killed 346 people in the span of five months. The Chicago-based planemaker is now reckoning with a blow to its reputation and the financial cost of getting the planes back in the air.

"We are taking appropriate steps to manage our liquidity and increase our balance sheet flexibility the best way possible as we are working through these challenges," Boeing Chief Financial Officer Greg Smith said in a statement.

In a tweet, Boeing Chief Executive Dennis Muilenburg said the company remains focused on safely returning the 737 MAX to service. "The MAX grounding presents significant challenges for our customers, company and supply chain," he wrote.

Boeing also said estimated costs to produce its flagship single-aisle aircraft increased by $1.7 billion in the second quarter, driven primarily by higher costs from a longer-than-expected reduction in its aircraft production rate.

Boeing reduced the number of single-aisle aircraft it produces monthly in the Seattle area from 52 to 42 following the second crash in Ethiopia while suspending deliveries of the aircraft to airlines, which cuts off fresh cash infusions and hits margins.

When it reported first-quarter results in April, Boeing abandoned its 2019 financial outlook, halted share buybacks and said lowered production due to the grounding had cost it at least $1 billion so far.

But the fuller picture of how much the grounding will cost Boeing, and how it plans to repair its image with the flying public, was not expected until the end of the second-quarter because 737 production cuts did not begin until mid-April.

Boeing also said it assumes the 737 MAX return to service in the United States and other countries will begin early in the fourth quarter, though the company cautioned the exact timeline could shift as it has in recent weeks.

Boeing is facing a slew of probes by regulators across the world as well as U.S. lawmakers and the Department of Justice. (Reporting by Eric M. Johnson in Seattle Editing by Susan Thomas)

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