Boeing starts counting the cost of its 737 MAX woes.

April 25, 2019
Boeing FAA fine
Boeing's 737 plant in Renton, Washington.

Boeing has begun factoring in more than $US1 billion in additional costs stemming from its 737 MAX problems as first-quarter profit fell 13 percent.

The manufacturer abandoned its 2019 financial guidance because it did not reflect the 737 MAX impacts and said it would issue a new guidance “at a future date”.

The global 737 MAX fleet was grounded after two crashes in less than five months, one in Indonesia and One in Ethiopia, killed 346 people. Boeing has also temporarily cut the 737 production rate in response to the crisis.

READ our 737 MAX coverage.

The results were the first signs of the pain the MAX issues are causing the company as works with global regulators and airlines to test a software fix for the plane and finalize associated training.

“Across the company, we are focused on safety, returning the 737 MAX to service, and earning and re-earning the trust and confidence of customers, regulators and the flying public,” said Boeing chief executive  Dennis Muilenburg.

“As we work through this challenging time for our customers, stakeholders and the company, our attention remains on driving excellence in quality and performance and running a healthy sustained growth business built on strong, long-term fundamentals.”

Boeing has completed testing the new software in engineering flights and reports suggest the Federal Aviation Administration will conduct certification flights next month.

The $US1 billion in MAX-related costs includes higher production expenses over the life of the program but not the cost of the software changes, pilot training, customer compensation and liability payments to the families of crash victims.

The Wall Street Journal reported some analysts estimates for tackling the MAX crisis run as high as $US3 billion when payouts to airlines and suppliers are included.

Boeing’s first-quarter profit fell 13 percent to $US2.15 billion and revenue was down by 2 percent to $US22.92 billion.

While the 737 MAX cast a shadow over the results, the company said the first-quarter also saw key defense wins, strong commercial widebody performance and orders and continued robust services growth. It also included Embraer shareholder approval for the proposed strategic partnership.

Commercial aircraft deliveries fell 19 percent in the first quarter to 149 as revenues fell 9 percent to $US11.82 billion and earnings from operations dropped 17 percent $US1.17 billion.

The first-quarter operating margin of 9.9 percent, down 1 percentage point,  reflected lower 737 deliveries but was partially offset by a higher margin on the 787 Dreamliner

The 787 production rate rose to 14 a month and widebody orders included 18 777X jets for British Airways parent company IAG, 20 787s for Lufthansa and 10 Dreamliners for Bamboo Airways.

Boeing has also rolled out the first 777X and the company said the program remained on track for the first flight this year and delivery in 2020.