Shares of Boeing and its suppliers fell on Dec 16 after reports that the US planemaker could temporarily halt production of 737 MAX aircraft, potentially adding to billions of dollars in costs, as its return to service is pushed to 2020.
The best-selling Boeing plane has been grounded since March after two fatal crashes in Indonesia and Ethiopia killed 346 people, costing the plane manufacturer more than US$9 bil (RM37.28 bil) in charges so far.
Boeing’s shares fell 4% in premarket trading to US$328.13, while Spirit AeroSystems Holdings Inc fell 3.4%. Spirit is Boeing’s biggest supplier and makes the MAX fuselage along with other parts such as pylons.
Analysts say a suspension of MAX production would likely result in significant additional charges for Boeing as well as its main suppliers, who have been shielded from a financial hit as they have continued to sell parts for the jet at a rate of up to 52 units a month, even as the planemaker has cut its own production to 42 a month.
“We would highlight Spirit AeroSystems, Safran SA and Senior Plc as names that could potentially experience greater disruption impacts if production is indeed slowed further or halted,” Berenberg analyst Andrew Gollan said.
Two suppliers said Boeing is likely to halt assembly of the 737 MAX jet for the time being, though some suppliers could be asked to keep producing to minimise disruption.
CFM International, a joint venture between Safran and General Electric Co, supplies engines to the MAX. Safran fell 1.5%, while shares of GE were up 0.5%.
Shares of British engineering firm Senior Plc were also up 2%. The company makes a wide variety of aircraft components and counts Boeing as one of its top customers.
The largest US planemaker’s board of directors is holding a two-day meeting in Chicago from Sunday to consider 737 MAX production changes, according to a person briefed on the matter.
Boeing could make an announcement on production plans as soon late on Dec 12, and this follows the US Federal Aviation Administration’s comments last week that it would not approve the plane’s return to service before 2020. – Reuters
