Several Wall Street analysts reportedly now expect Boeing Co., which reports full-year and fourth-quarter earnings on Jan. 29, to take additional charges related to the troubled 737 Max airplane.
Boeing’s 737 Max crisis has worsened with a production shut down, layoffs and scathing internal emails.
The grounding of Boeing's best-selling plane, which came in March after a second deadly crash, now threatens a second summer travel season. The death toll for the two crashes, the first in Indonesia and the second in Ethiopia, was 346 people.
The company took a $5.6 billion pretax charge in July to compensate airlines and other customers for the grounding, which is now in its 11th month.
“They’re going to have to pay more,” Ron Epstein, aerospace analyst at Bank of America Merrill Lynch, told CNBC. He 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% of Boeing’s profits last year came from the Max.
Meanwhile, Southwest Airlines Co said on Thursday it is extending cancellations of Boeing 737 MAX flights until June 6, citing the planemaker's decision to recommend pilot simulator training before resuming flights and uncertainty about when regulators will approve their return to service, Reuters reported.
The decision follows a similar announcement by American Airlines Co earlier this week to extend cancellations until June 3.
Southwest, the largest operator of the MAX worldwide, said it is now removing roughly 330 weekday flights from its more than 4,000 daily flights, which is 10% higher than in December when it said it was removing roughly 300 weekday flights through April 13.
Once the Federal Aviation Administration (FAA) gives 737 MAX approval to return to service, airlines will need at least 30 days to prepare the jets and its pilots for commercial flights, airline and union officials have said.
It is still unclear how much time the FAA may require pilots to spend in simulators before they can resume flights.
Reuters has reported the FAA will not approve the return of the MAX until February and it could slip until March or later. Last week, Boeing said it would recommend requiring all pilots to undergo simulator training before resuming flights, which may also push back the resumption of commercial flights.
Last month, United Airlines Holdings Inc extended cancellations of its MAX flights from March until June 4.
To be sure, the American public remain wary of the Boeing 737 Max almost two years after the aircraft was first grounded following two crashes within five months of each other that caused hundreds of deaths, according to a report from TechnoMetrica for Investor's Business Daily.
The report notes recent government estimates show Boeing lowering total U.S. GDP growth this year by 0.5 percentage points. TechnoMetrica's survey shows:
- 56% of Americans who have been closely following the situation said they would likely avoid traveling on the Boeing 737 Max once it is back in use.
- 30% are "very likely" to avoid flying on one.
- 41% would not have a problem boarding one of the planes once they are cleared to fly.
- 51% hold a less than favorable view of Boeing.
- 48% in a June, 2019 survey were unlikely to fly in a Boeing 737 Max.
- 21% said they were "very likely" to avoid a Boeing 737 Max.
- 48% said they were fine with flying in one.
- 47% said they held an unfavorable view of Boeing.
TechnoMetrica attributes the falling confidence to "a prolonged grounding, coupled with continued revelations of a lax safety culture at Boeing," noting later that the company's "stock is down 26% from its 52-week high of $446.01.
Perceptions of Boeing have declined sharply among investors, amid a growing number of analyst downgrades of the Boeing stock."
- 54% of Boeing investor households hold a less than favorable view of the company because of the news about the 737 Max.
- 49% said the same in June.
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