WASHINGTON/PARIS (Reuters) – Boeing Co suppliers, customers and financiers braced on Monday for a possible freeze in Boeing 737 production for the first time in more than 20 years as the grounding of the best-selling MAX looks set to last well into the New Year.
Two suppliers told Reuters that Boeing was likely to halt assembly of the jet, though some suppliers could be asked to keep producing to minimize disruption.
Boeing’s board was due to meet for a second day in Chicago on Monday to assess output decisions, with an announcement expected later in the day.
A person briefed on the matter said on Sunday Boeing was considering whether to cut or halt production of its grounded 737 MAX after the Federal Aviation Administration (FAA) said last week it would not approve the plane’s return to service before 2020.
Boeing’s best-selling plane has been grounded since March after two crashes in Indonesia and Ethiopia killed 346 people, costing the plane manufacturer more than $9 billion so far.
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 per month, even as the planemaker has cut its own production to 42 per month.
Disruptions to production could also result in layoffs or furloughs of workers at Boeing’s 737 factory south of Seattle, though the extent of the impact was not immediately clear.
Boeing’s shares were down nearly 3% in morning trading, while Spirit AeroSystems Holdings Inc fell roughly 2.3%. Spirit is Boeing’s biggest supplier and makes the MAX fuselage along with other parts such as pylons.
“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.
The person briefed on the matter told Reuters a temporary shutdown was more likely than another cut, but it would potentially take a few weeks before production could be halted.
Boeing said late on Sunday the company “will continue to assess production decisions based on the timing and conditions of return to service, which will be based on regulatory approvals and may vary by jurisdiction.”
Last week, even before a fresh delay announced by the U.S. FAA on the 737 MAX, Reuters reported that Boeing was delaying by months its overall plan to speed up production as the U.S. planemaker struggles to win regulatory approval to return the jetliner to commercial service.
Reporting by David Shepardson in Washington, Tim Hepher in Paris, and Eric M. Johnson in Seattle; Editing by Jane Merriman and Lisa Shumaker
Source : Denver Post
