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Boeing says grounding of 737 Max jets will cost $18 billion

By Marianne Curphey

Aircraft manufacturer confirms it will cut production of its 787 Dreamliners

The grounding of the 737 Max jets after two fatal crashes will cost Boeing close to $18bn (£13.83bn, €16.4bn), the company said yesterday from its headquarters in Chicago.

Unveiling results for the fourth quarter of 2019 and the full year 2019, Boeing said it had negative free cash flow of $2.67bn (€2.43bn, £2.05bn) in the quarter ended December 31, compared with a positive free cash flow of $2.45bn a year earlier.

"We recognise we have a lot of work to do," said Boeing president and chief executive officer David Calhoun.

"We are focused on returning the 737 MAX to service safely and restoring the long-standing trust that the Boeing brand represents with the flying public. We are committed to transparency and excellence in everything we do. Safety will underwrite every decision, every action and every step we take as we move forward. Fortunately, the strength of our overall Boeing portfolio of businesses provides the financial liquidity to follow a thorough and disciplined recovery process."

Total company backlog at quarter-end was $463bn (€421bn, £356bn) and included net orders for the quarter of $13 billion.

Commercial Airplanes delivered 79 airplanes during the quarter, including 45 787s, and captured orders for thirty 737 MAX aircraft at the Dubai Air Show and two 777 freighters for Lufthansa. The 787 programme also booked 36 net orders in the quarter.

Boeing confirmed that the 787 Dreamliner production rate will be reduced from the current rate of 14 airplanes per month to 12 airplanes per month in late 2020.

“Based on the current environment and near-term market outlook, the production rate is expected to be further adjusted to 10 airplanes per month in early 2021, and return to 12 airplanes per month in 2023,” the statement said. “The first flight of the 777X was completed on January 25, and first delivery is targeted for 2021.”

Commercial Airplanes backlog included over 5,400 airplanes valued at $377bn (£290bn, €343bn).

Earlier this month it was revealed that Boeing is considering going to the bond markets to raise cash in the face of mounting costs over its beleaguered 737 Max aircraft. It will be the first time since July that the US conglomerate has sought capital in such away.

Boeing's 737 Max series were grounded after being involved in two major crashes, in October 2018 and March 2019 that killed 346 people. Both fatal accidents were blamed on faults on flight deck equipment in the new airliner.

FURTHER READING: Boeing internal messages say 737 Max 'is designed by clowns'

FURTHER READING: Boeing reports lowest yearly orders in 30 years

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