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Boeing's 737 production cut hits suppliers' shares

Boeing's 737 production cut hits suppliers' shares
FILE PHOTO: Employees walk by the end of a 737 Max aircraft at the Boeing factory in Renton, Washington, U.S., March 27, 2019. REUTERS/Lindsey Wasson/File Photo   -   Copyright  Lindsey Wasson(Reuters)
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PARIS (Reuters) – Boeing’s decision to cut the production of its 737 aircraft hit the shares of its suppliers on Monday while its European rival Airbus rose.

Boeing Co said late on Friday it planned to cut its monthly 737 aircraft production by nearly 20 percent after two deadly crashes, signalling it does not expect aviation authorities to allow the plane back in the air any time soon.

Boeing’s decision knocked down the shares of aerospace groups involved in the 737, with Meggitt, Melrose and Safran all falling by between 1 percent to 2.5 percent.

“If the lower rate endures through September 2019, the potential loss of revenue to Meggitt is $8.525m, perhaps somewhat more as we figure the monthly 737 MAX production rate was likely to rise towards 57 per month through 2019,” wrote analysts at brokerage Jefferies.

(GRAPHIC: Suppliers after second Boeing crash – https://tmsnrt.rs/2DeeqXZ)

Deliveries of Boeing’s best-selling aircraft were frozen after a global grounding of the narrowbody model following the crash of an Ethiopian Airlines jet on March 10, killing all 157 people onboard.

Production will be cut to 42 airplanes per month from 52 starting in mid-April, the company said in a statement, without giving an end date.

Investment bank Cowen said Boeing’s decision to cut the production of the 737 was the right thing to do.

“The 737 rate cut to 42/month should help resolve the MAX crisis but with a large 2019 cash hit,” wrote Cowen in a note.

(Reporting by Sudip Kar-Gupta in Paris and Noor Zainab Hussain in Bengaluru; Editing by Keith Weir)

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