Boeing expects nearly $19 billion in costs related to the grounding of its 737 MAX jets, the U.S. planemaker said on Wednesday as it swung to its first annual loss since 1997 and indicated it would again cut production of its bigger 787 Dreamliner aircraft.
The Dreamliner widebody is the main source of cash for Boeing as it battles the global grounding of the smaller 737 MAX following two crashes that killed 346 people.
READ MORE: WestJet, Air Canada pull Boeing 737 MAX 8 from flight schedules until June
The MAX grounding forced the planemaker to freeze production of the aircraft and let to the ouster of former Chief Executive Officer Dennis Muilenburg.
“We recognize we have a lot of work to do,” Boeing President and CEO David Calhoun said in a statement.
Boeing shares rose 3 per cent in premarket trading, as some analysts had expected an even larger charge for 737 MAX costs.
The charge includes $8.3 billion to compensate airline customers that are canceling flights and scaling back growth plans in a hit to profits while their MAX jets remain grounded and $6.3 billion for production costs in 2019.
READ MORE: Boeing says 737 MAX 8 planes may not return to service until mid-2020
Boeing said it estimated another $4 billion charge in 2020 as it gradually resumes 737 MAX production at low rates.
Core operating loss was $2.53 billion, or $2.33 per share, compared with a profit of $3.87 billion, or $5.48 per share, a year earlier.
Analysts on average expected Boeing to post earnings per share of $1.47 in the quarter, though several had predicted a loss amid a wide range of forecasts due to uncertainties over the cost of the 737 MAX crisis.
Adding to Boeing‘s pain, demand for its bigger and more profitable jet — the 787 Dreamliner — has waned in the face of the U.S.-China trade war, prompting the company to cut production, hurting cash flow at a time when its debt is mounting.