Washington, April 24 (GCBusiness) US aircraft manufacturer Boeing said it has taken on $1 billion in additional costs due to the grounding of its global 737 MAX fleet following two deadly crashes and the subsequent reduction in the plane’s production rate, Chief Financial Officer Gregory Smith said during the company’s first-quarter earnings call on Wednesday.
“As a result of the 737 MAX grounding, we delivered over 50 fewer 737 aircraft in the quarter than originally planned. This resulted in lower [Boeing Commerical Airplanes (BCA)] revenue, operating earnings and cash. In addition, BCA earnings were also reduced by period costs associated with the MCAS software update and development of related training materials. We also booked approximately $1 billion of additional costs due to the adjustment to the production rate to 42 a month,” Smith said.
The company’s CFO explained that the $1 billion in additional costs is due to the lower production rate, which is causing fixed expenses to be amortized over a longer period of time. He added that the figure also includes additional labor, escalation and support.
Boeing reported overall revenues of $22.9 billion for the first three month of this year, down 2 percent from $23.4 billion during the first quarter of 2018. For its commercial airlines division, the company reported revenues of $11.8 billion for first quarter of 2019, a decrease of 9 percent from $12.9 billion over the same time last year.
Two Boeing 737 MAX aircraft have crashed over the past six months – one in Indonesia in October 2018 and another in Ethiopia in March. In the wake of the latest crash, aviation authorities and carriers around the world have either grounded all 737 MAX series aircraft or closed their airspace to them.