- Title: Ripple effects of Boeing 737 MAX suspension could be massive - analyst
- Date: 17th December 2019
- Summary: DALLAS, TEXAS, UNITED STATES (DECEMBER 17, 2019) (REUTERS VIA SKYPE) (SOUNDBITE) (English) ATMOSPHERE RESEARCH GROUP, PRESIDENT, HENRY HARTEVELDT, SAYING: "The financial impact of Boeing's decision to suspend production, I think, could be quite extensive. Boeing has said it will redeploy, at least for now, to 12000 employees at its factory to work on other aircraft at Boeing facilities. But there are approximately 600 companies who are part of the Boeing 737 max supply chain. Some of them are small, some of them are large. And depending on how long this suspension lasts, we could start to see of furloughs. We could start to see people lose their jobs. And, you know, the ripple effects could be quite massive. This could take a toll on... a noticeable toll on the economy. How much, though, you really need an economist to answer."
- Embargoed: 31st December 2019 17:47
- Keywords: American Airlines Astronics Boeing 737 MAX Ducommun Hexcel Renton Safran Southwest Spirit AeroSystems Holdings United Airlines crash factory global suppliers production suspension
- Location: VILLAROCHE, + COLOMIERS, + MONT-DE-MARSAN, FRANCE / DALLAS, TEXAS, + RENTON, WASHINGTON, UNITED STATES / UNKNOWN LOCATIONS
- City: VILLAROCHE, + COLOMIERS, + MONT-DE-MARSAN, FRANCE / DALLAS, TEXAS, + RENTON, WASHINGTON, UNITED STATES / UNKNOWN LOCATIONS
- Country: USA
- Topics: Company News Markets,Economic Events
- Reuters ID: LVA004BAD7SEL
- Aspect Ratio: 16:9
- Story Text: Shares of Boeing and its main global suppliers fell on Tuesday (December 17) after the U.S. planemaker said it would suspend production of its best-selling 737 MAX jet in January, its biggest assembly-line halt in more than two decades.
The 737 MAX has been grounded since March after two crashes in Indonesia and Ethiopia killed 346 people within five months, costing the plane manufacturer more than $9 billion (USD) so far.
Britain's Senior Plc, which makes parts including airframes and engine build-up tubes for the MAX, was one of the first suppliers to comment on the suspension, saying it was working closely with the U.S. planemaker to assess the impact of a production shutdown on its 2020 sales.
The fallout extended to carriers, with Southwest Airlines extending cancellations of MAX flights by another five weeks through April 13, due to the continued uncertainty around the timing of the aircraft's return to service.
The U.S. planemaker's shares fell 1.3% in light premarket trading to $322.
Shares of France's Safran and Senior Plc were down between 9% and 3%, respectively.
Boeing is biggest customer for the British engineer's aerospace unit, making up 15 percent of the division's sales.
Shares of Boeing's top supplier, Spirit AeroSystems Holdings Inc, were flat.
Analysts say Wichita-Wisconsin based Spirit is the most exposed to Boeing, drawing more than 50% of its annual sales from the MAX.
The company now risks losing some revenue next year as its production rate of the jet's fuselage and other components come into question.
Safran, which produces engines for the MAX aircraft with General Electric, has warned if the aircraft's grounding lasts until the end of the year, its cash conversion could dip below its targeted 50-55% range of recurring operating income.
Unlike most suppliers, it is paid mostly once the airplanes are delivered to the airline buyer.
GE has already estimated the MAX grounding to reduce its cash flow by $1.4 billion in 2019.
Shares of other suppliers, such as wing flaps maker Ducommun, composite materials supplier Hexcel Corp, and aircraft exterior lighting provider Astronics Corp were down between 10% and 15%.
Other smaller suppliers including Melrose Industries, whose GKN business has a contract to supply windows for the passenger cabin of the 737 MAX, and Meggitt, which makes parts including fire protection system for the MAX engine and auxiliary power unit, were down about 1% in Europe.
(Production: Aleksandra Michalska)
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