Boeing is already estimating a $1 billion increase in costs related to its troubled 737 Max and has pulled its forecast of 2019 earnings because of uncertainty surrounding the jetliner, which remains grounded after two crashes that killed 346 people.
The $1 billion figure is a conservative starting point. It covers increased production costs over the next few years but does not include the company’s spending to fix software implicated in the crashes, additional pilot training, payments to airlines for grounded jets or compensation for families of the dead passengers.
The estimate was disclosed Wednesday in a presentation for investors as Boeing released first-quarter financial results, which missed Wall Street expectations.
While lacking many details, the disclosures gave the clearest picture yet of the financial damage that the accidents are causing to the aerospace giant.
Boeing CEO Dennis Muilenburg repeated that the company is making progress on updating key flight-control software in the Max with the goal of convincing regulators to let the plane fly again.
Chicago-based Boeing Co. said its previously issued full-year guidance didn’t account for 737 Max impacts. It plans to issue new guidance at a future date.
The company also said it is suspending stock buybacks. Boeing spent $2.3 billion in the first quarter to buy its own stock, which is designed to make remaining shares more valuable.
Investors and consumers have been scrutinizing Boeing since Max jets crashed in October and March. The accidents have damaged the company’s reputation for safety, caused the worldwide grounding of about 370 Max jets, and raised questions about the U.S. government’s approval of the plane in 2017.
In January, Boeing projected full-year adjusted earnings of about $20 a share. But after the company announced it was cutting production of the Max, analysts had dropped their forecast all the way to $16.40 on average, according to FactSet.
On a conference call, Muilenburg defended the company after an analyst asked how Boeing got in this spot. The CEO disputed the notion that Boeing engineers and federal regulators may not have fully understood how pilots would interact with new anti-stall software called MCAS.
Shares rose $1.44 to close at $375.46. Despite a recent slump, the stock has gained 16.4% this year and is up 4.5% since the first fatal crash.