Boeing's share price declines after 737 production cut
A decision by US aviation giant Boeing to cut production of its 737 aircraft has hit the shares of the company and its suppliers in US pre-market trading, as the company continues to grapple with a crisis following two deadly crashes in less than five months.
Boeing said on Friday it planned to cut the monthly production of the 737 MAX aircraft by nearly 20 percent after two crashes in Ethiopia and Indonesia, signaling it does not expect aviation authorities to allow the plane to fly any time soon.
Production will be cut to 42 airplanes per month from 52 starting in mid-April, the company said in a statement, without giving an end date.
The shares of the world’s largest aviation company dropped about 2.7 percent in pre-market trading on Monday, while its crisis lifted shares of European arch rival Airbus by around 1 percent.
Boeing’s decision also knocked the shares of aerospace groups involved in the 737, with Meggitt, Melrose and Safran all falling by between 1 percent and 2.5 percent.
“If the lower rate endures through September 2019, the potential loss of revenue to Meggitt is $8.525 million, perhaps somewhat more as we figure the monthly 737 MAX production rate was likely to rise toward 57 per month through 2019,” wrote analysts at brokerage Jefferies.
Deliveries of Boeing’s best-selling aircraft were frozen after a global grounding of the model following the crash of an Ethiopian Airlines jet on March 10, which killed all 157 people onboard.
Less than five months earlier, a Boeing 737 MAX operated by Lion Air crashed on October 29, killing all 189 passengers and crew.
The embattled company says it plans to release a software fix to the anti-stall system used aboard the 737 MAX aircraft in the coming weeks.
US regulators have demanded further improvements to a proposed fix before it could be submitted for review.
The FBI has joined the criminal investigation into the certification of the Boeing 737 MAX. The investigation was launched by US Department of Transportation.
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