Deadly crashes have already cost Boeing $1bn

24 April 2019, 12:48 | Updated: 24 April 2019, 18:34

Boeing has revealed that a cut in jet production after two deadly crashes involving its 737 MAX aircraft has already cost it $1bn (£770m).

The company added that it was still too early to calculate the overall impact on its financial results for the year after accidents in Indonesia and Ethiopia killed 346 people.

Boeing, the world's largest commercial aircraft maker, abandoned its annual profit forecast as its fleet of 737 MAX airliners remains grounded worldwide, saying that the timing of their return to service remains uncertain.

It has reduced production of the aircraft from 52 a month to 42 in the wake of the crashes but is still paying suppliers and workers as well as other fixed costs as it prepares to ramp this up again in the future.

The cost of the production cut accounts for the $1bn charge in the company's first quarter financial figures.

Boeing did not quantify the additional impact of a software fix and training update that it has been working on ahead of plans to return the 737 MAX to service.

All versions of the aircraft were withdrawn last month - days after an Ethiopian Airlines jet came down outside Addis Ababa and five months after a Lion Air flight suffered a similar fate in the Java Sea.

Investigations into the crashes have centred on anti-stall software.

Boeing revealed that efforts to provide a fix to the software had so far resulted in 135 "test and production flights" but it did not give details on when it hoped to resolve the issue and roll out updated training packages to airlines.

Its decision not to update its earnings forecasts - guidance to investors on its expected future financial performance - reflects a lack of clarity on how much the crisis is going to cost the company.

There is the potential for lawsuits and regulatory penalties in addition to costs associated with finding a solution.

Boeing reported a 21% fall in first quarter profits.

The company said total deliveries in the first quarter were 19% down on the same period last year.

Operating cash flow in the first quarter was about $350m (£270m) lower, while core operating earnings were 21% down at just shy of $2bn (£1.55bn).

Net earnings, which takes some one-off costs into account, were 13% down at $2.1bn (£1.62bn).

Boeing boss Dennis Muilenburg said: "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."

The company has acknowledged that anti-stall software known as MCAS was a common link in the separate chain of events leading to both crashes.

Mr Muilenburg insisted there was "no surprise or gap or unknown here or something that slipped through the certification process".

He said: "We know exactly how the aeroplane was designed. We know exactly how it was certified.

"We've taken the time to understand that.

"That has led to the software update that we've been implementing and testing and we're very confident that when the fleet comes back up, the MAX will be one of the safest aeroplanes ever to fly."

Shares, which were 11% down on their pre-Ethiopia crash level ahead of Wednesday trading, were 1% higher in early trading after the update - which also revealed Boeing had sped up production of its 787 Dreamliner aircraft.