By Aishwarya Nair
(Reuters) – Boeing Co shares closed down 5.6% on Friday after the planemaker halted deliveries of some 737 MAX jets due to quality-related problems in certain components made by one of its main suppliers.
Boeing is under tough regulatory scrutiny following the deadly crashes of its MAX planes in 2018 and 2019 and the pause in deliveries may delay plans for production ramp-up as it needs to undertake inspections of affected jets, some analysts said.
Any delay in deliveries is likely to upset airlines that have been counting on the company for a timely supply of planes to boost their fleets.
Boeing was poised to raise the production of its best-selling family of jets to 38 in June and 42 by January 2024 from 31 per month currently, Reuters reported earlier this week.
The problem, disclosed by Boeing on Thursday, involves the installation of two fittings that join the aft fuselage made by Spirit AeroSystems to the vertical tail, which were not attached correctly to the structure of the fuselage before it was sent to the planemaker.
The latest quality issue is the second such problem to plague the planemaker this year, after it was briefly forced to halt deliveries of 767 freighters.
The recent discoveries can be attributed to two main factors: less experienced workers and more rigorous inspections of aircraft before delivery, Melius Research Vice President Scott Mikus said.
Boeing, together with Spirit, will have to undertake inspections of the affected MAX 7, MAX 8 and MAX 8200 airplanes and fuselages.
“Unlike the recent 787 delivery pause in Q1 … this issue relates to actual non-conforming parts, which will need to be inspected (at minimum) or reworked. This likely points to a longer pause this time (BA resumed 787 deliveries after ~2 weeks),” Wells Fargo analyst Matthew Akers said.
Akers, however, added that the impact could be “short term in nature” and that Boeing may push its 2023 cash flow goal of $3 billion to $5 billion toward the lower end.
Airbus shares have outperformed those of Boeing this year https://fingfx.thomsonreuters.com/gfx/buzz/klpygmjybpg/Airbus%20vs%20Boeing.PNG
Shares of Spirit closed down 20.7% on Friday.
“We see more negative financial exposure to this news at Spirit than at Boeing,” J.P. Morgan analyst Seth Seifman said.
The issue could weigh on the fleet-expansion plans of the airlines.
Southwest Airlines expects the issue to impact its current delivery schedule, while American Airlines said it was working with Boeing to understand the effect.
Europe’s Ryanair, which was scheduled to receive 24 737 aircraft over the next 2-1/2 months, said it was working with Boeing on the possible impact.
(Reporting by Aishwarya Nair, Abhijith Ganapavaram in Bengaluru and Valerie Insinna in Washington; Additional reporting by Bansari Kamdar and Nathan Gomes in Bengaluru; Editing by Sriraj Kalluvila and Anil D’Silva)