The 737 MAX debacle is costing Boeing a pretty penny.
In a stock exchange filing for the third quarter of 2020, Boeing noted it had $5.981 billion in 737 MAX customer concessions and other considerations liability during 2020. Much of this comes from Boeing’s compensation deal with customers over the 737 MAX grounding, which has stretched over 18 months at this point.
The liability total includes $1.6 billion that is expected to be liquidated by lower customer delivery payments. Boeing’s compensation deal with customers means they have to pay less upon delivery for certain MAX aircraft, which means a lower cash influx from these aircraft in the future.
Approximately 450 MAX aircraft are awaiting delivery, with some aircraft not having been sold.
In cash, Boeing expects $800 million to be paid in cash and another $200 million in other concessions. Breaking apart the cash payments, Boeing expects $200 million in payments to customers in 2020 and $400 million in 2021.
The remainder of the $3.4 billion will depend on the outcomes of negotiations with customers. Some airlines may choose to get some cash while others could go for lower pre-delivery or delivery payments.
Boeing still has to negotiate with a lot of customers
Boeing’s customers have been negatively impacted by the 737 MAX grounding. This wreaked havoc on Airlines like American, Southwest, and United who had busy schedules for the summer season. Naturally customers then turned to Boeing looking for some compensation.
Some airlines have already agreed to some form of compensation, while others continue to have ongoing negotiations. With the end of the 737 MAX grounding in sight, Boeing is likely getting to the end of its customer negotiations and a growing bill.
After regulators approve the Boeing 737 MAX to fly, maintenance personnel and Boeing will need time to prepare the aircraft for service. Pilots will need to undergo any re-currency training using a relatively limited number of simulators.
