Boeing Shares Tumble as Parts Issue Halts Deliveries of Some 737 MAXs :Shares of Boeing Co (BA.N) dropped 6% in early trading on Friday after the American aircraft manufacturer stopped delivering certain 737 MAXs owing to a fresh supplier quality issue with Spirit Aero Systems (SPR.N). According to Boeing, the problem will probably impact a “significant” number of 737 MAX aircraft that have not yet been delivered and are both in production and storage. This might lead to a reduction in 737 MAX deliveries in the near future.
“I do think this is an overreaction from the stock, and I can understand why it’s a shoot first, ask questions later because Boeing has impaired their trust with investors over the constant and repeated errors over the last few years,” said Thomas Hayes, chairman and managing member at Great Hill Capital. As it works to increase production of both its widebody 787 Dreamliner and the popular MAX narrowbody plane, Boeing has struggled with supply chain issues. The business had to temporarily stop 787 Dreamliner deliveries in February in order to perform extra study on a fuselage component.
Airlines Waiting for Delivery
Airlines waiting for delivery are likewise inconvenienced by the most recent problem. While American Airlines (AAL.O) said it was working with the plane maker to determine the effects, Southwest Airlines (LUV.N) anticipates that the problem would affect its current delivery schedule. But on Thursday, United Airlines stated that it does not “expect any significant impact on capacity plans for this summer or the rest of the year.” Analysts are also concerned about how the most recent glitch may affect Boeing’s cash flow.
The aircraft manufacturer announced its first positive free cash flow since 2018 earlier this year, following the two 737 Max catastrophic accidents that led to the plane’s global grounding. According to Boeing, the most recent quality problem involved a Spirit-supplied fuselage fitting and is thought to have started in 2019. It is not a flight safety concern, therefore aircraft that are currently in service can continue to fly.
Shares of Spirit, which produces the wing, engine pylons, thrust reversers, and fuselage for the 737 MAX aircraft, fell 18.4%. The consensus among our experts is that these companies lack the trained labor force required to sustain the production ramp that OEMs like Boeing and Airbus are aiming for, according to Third Bridge analyst Christopher Raite.