737 MAX crisis could cost Boeing $20 billion, Wall Street analyst says

The US aerospace giant Boeing’s costs are likely to rise substantially, analysts say, as airlines continue to push back MAX 737’s from their schedules. The company’s best-selling planes have now been grounded for 11 months.

The worldwide grounding saw airlines lose more than $1 billion in revenue, and Boeing more than $7 billion. The company, which took a $5.6 billion pretax charge in July to compensate airlines and other customers for the grounding, is to report full-year and fourth-quarter earnings on January 29. Some Wall Street analysts expect it to take additional charges related to the troubled airplane.

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“They’re going to have to pay more,” Ron Epstein, aerospace analyst at Bank of America Merrill Lynch, told CNBC. According to his estimates, the total cost of the grounding could reach $20 billion (excluding any settlements from lawsuits from crash victims’ families) if the planes return by June or July. Epstein estimates that about 40 percent of the company’s profits last year came from the MAX.

An aerospace and defense analyst at Jefferies, Sheila Kahyaoglu said this week that the charges for aircraft customers’ compensation are likely to rise to $11 billion. She assumed that the planes will return to service in April.

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This week Moody’s said it was putting Boeing’s debt on a review for a possible downgrade, less than a month after cutting its credit rating by one notch. It explained that the crisis is wearing on longer than expected. The lower the credit rating, the more expensive it is for Boeing to borrow.

Boeing said earlier it would tap the debt markets if it needs more cash to cover the costs of the crisis.

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