Boeing Shares Plummet After Production Issue

Topline

Boeing shares sank on Friday after the company announced delays on a sizable number of deliveries for its 737 Max jet, the latest blow for the planemaker after years of crises including the Covid-19 pandemic and several deadly crashes.

Boeing said there would be delays to 737 Max deliveries.

Key Facts

Shares of Boeing fell more than 5% during premarket trading on Friday after the company said it had halted deliveries on some of its 737 Max jets over a problem with parts from supplier Spirit AeroSystems.

Boeing said Spirit had used a “non-standard” process when installing components towards the rear of the planes that could lead jets to fall short of regulatory requirements.

Boeing said it has notified the Federal Aviation Administration of the problem, which could date back as far as 2019, and is working to inspect jets and replace parts where necessary.

The company stressed there is “not an immediate safety” issue and said in-service fleets “can continue operating safely.”

The problem is likely to affect a “significant number” of undelivered 737 Max jets in production and storage, Boeing said, and will probably cut deliveries in the “near-term.”

Boeing did not immediately respond to Forbes’ request for comment.

Tangent

Shares for Spirit AeroSystems Holdings were down more than 11% during premarket trading on Friday morning.

News Peg

The delivery delays for Boeing’s 737 Max will come as a blow to both Boeing and the airline industry as a whole. The jet is one of the company’s top sellers and a global shortage of jets—as well as pilots—is hampering airlines’ ability to cope with resurgent travel demand following the Covid-19 pandemic. The Max line has also been a major headache for Boeing. Regulators grounded Boeing’s 737 MAX fleet worldwide in 2019 after design flaws led to two deadly crashes in a matter of months. The problem has been fixed and the craft cleared for flight by regulators.

What We Don’t Know

It’s not clear which airlines will be most affected by the anticipated delays. The Financial Times reported United Airlines and Air India have placed large orders recently, adding that Boeing has also struggled to deliver the jets to Southwest Airlines. The delays may also impact future orders and cede ground to Boeing’s rival Airbus. Irish budget carrier Ryanair was reportedly considering placing another order with Boeing after previously criticizing the company’s failure to deliver on time and news of further delays could revive concerns.

Crucial Quote

The FAA said it had “validated” Boeing’s assessment that there was no immediate safety issue with affected jets, Reuters reported. The agency said it will inspect all affected aircraft prior to delivery.