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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Holders of some of Boeing’s bonds have likewise suffered losses.

The company’s 2.95% notes due February 2030 were recently quoted bid at around US$101.614, down from US$102-24 when they were initially priced. The fall in the value of the notes comes despite a decline of around three basis points in the yield of the 10-year U.S. Treasury note, which was last bid at around 1.866%.

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Mounting concerns

Boeing’s latest US$5.5bn bond issuance, which has maturities that range from 2- to 40-years, added to a debt pile that could exceed US$24bn before the end of 2019, according to Fitch Ratings. While the figure incorporates nearly US$10bn of new debt estimated to be sold this year, built-up working capital related to its 737 MAX grounding could tip the total debt scale higher.

Fitch continued that Boeing also faces a long list of other concerns, including 777X development, a potential new mid-market airplane (NMA) launch, and several planned production rate increases, as well as various lawsuits and investigations tied to the two recent fatal 737 MAX crashes. 

The ratings agency further expects “there will be a lingering operating margin impact for several years after the 737 MAX returns to service.”

In the meantime, the U.S. aviation industry has not been entirely kind to shareholders, as evidenced by shares of the U.S. Global Jets exchange-traded find (ETF / NYSEARCA: JETS), which has among its top holdings Delta Air Lines (NYSE: DAL), American Airlines (NASDAQ: AAL) and Alaska Air Group (NYSE: ALK – Boeing in 2018 had touted Alaska Airlines as a “Supplier of the Year”).

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In fact, JETS has returned about 14.4% year-to-date in 2019, about half of the S&P 500’s 27% gains over the same period.

Market participants will likely be eyeing the extent of the impact from Boeing’s 737 MAX production suspension in late January 2020, when it is slated to release its fourth quarter of 2019 earnings results.

In the meantime, the firm said it has continued to build new airplanes, and there are now an estimated 400 newly-built aircraft in storage – the delivery of which it intends to prioritize amid the suspension of its 737 MAX.