With the continued worldwide grounding of the 737 MAX, Boeing has announced that it will be reducing production of the narrow-body jet by 20 percent from 52 units per month to 42 units per month starting in mid April. The news hit the planemaker’s share price even further since the crash of a 737 MAX 8 in Ethiopia on March 10 with a further drop of four percent. Since the 737 MAX was grounded Boeing’s market value has fallen by US$26 billion, according to Reuters.
It is not just Boeing’s share value that has been hit as suppliers have also been greatly affected by production cuts in the 737 MAX program. The share value of Spirit AeroSystems has fallen by five percent, while Triumph Group dropped six percent. European suppliers such as Meggitt, Melrose and Safran are down between 0.4 percent and two percent.
While the Cowen Brokerage noted that “The 737 rate cut to 42/month should help resolve the MAX crisis but with a large 2019 cash hit, Bank of America Merrill Lynch analysts cut Boeing’s rating to “neutral” from “buy” on Monday, saying the 737 delay could last longer than previously expected and estimated six to nine months of disruption versus three to six months previously.”
