Boeing Investors Brace For Impact Of 737 MAX Suspension

Prices of U.S. airline giant Boeing’s (NYSE: BA) stock and certain of its bonds have taken a nosedive after the company recently said it will suspend production of its 737 MAX program starting in January.

The aerospace firm’s decision comes amid ongoing safety and regulatory concerns about the 737 MAX jetliner, which had been the focus of two fatal crashes earlier in 2019, resulting in the deaths of more than 345 people.

Boeing said Monday that they think its decision, which was driven in large part by the extension of certification into 2020, as well as the “uncertainty about the timing and conditions of return to service,” is “least disruptive to maintaining long-term production system and supply chain health.”

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With the Federal Aviation Administration (FAA) and global regulatory authorities determining Boeing’s timeline for certification and return to service, the Chicago-headquartered company said it is responsible for ensuring that their every requirement is fulfilled, and every question answered.

Meanwhile, Boeing’s shares have plunged nearly 27% since March, when its airliner was involved in an Ethiopian Airlines jet crash that killed all members onboard – the second such fatal incident since late October 2018, when a Lion Air flight crashed moments after takeoff in Indonesia. Boeing’s stock has also fallen a little more than 5% since Friday’s market close, amid the announcement of the halt in production.

News of the production hiatus has also wreaked havoc on some of its global suppliers, including French aerospace-component and defense company Safran (OTCMKTS: SAFRY), whose American Depositary Receipts (ADRs) were last down around 1.25% on the day Tuesday to US$38.81, as well as UK-based engineering firm Senior plc (OTCMKTS: SNIRF), whose equity had plummeted over 10.35% on the day to £167, according to the IBKR Trader Workstation.

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The author does not hold any positions in the financial instruments referenced in the materials provided.

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