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Boeing shares slip as grounded 737 MAX faces new hurdle

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Boeing shares slip as grounded 737 MAX faces new hurdle
FILE PHOTO: The company logo and trading informations for Boeing is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., March 13, 2019. REUTERS/Brendan McDermid   -   Copyright  BRENDAN MCDERMID(Reuters)
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By Ankit Ajmera

(Reuters) – Shares of Boeing Co <BA.N> fell 3% on Thursday after the U.S. aviation regulator found a new flaw in the 737 MAX jet, potentially delaying the aircraft’s return to service and piling more pressure on the planemaker’s suppliers.

Boeing was forced to ground its jet worldwide earlier this year following two fatal crashes, sending shockwaves through the global aviation sector.

The single-aisle 737, the world’s most-sold commercial aircraft, is central to Boeing’s future with more than 5,000 orders and a backlog valued at nearly $500 billion at list prices.

Barclays analyst Christopher Keyworth said any further delay in the return of the jet to service could have financial implications for aircraft parts suppliers as well as airlines, which have already warned of a hit to their 2019 profits due to the groundings.

“We now anticipate a widespread ‘supplier reset’, with FY20E impact not yet factored into consensus,” Barclays analyst Christopher Keyworth wrote in a note, downgrading UK-based aero supplier Senior Plc <SNR.L> to “equal weight”.

The U.S. Federal Aviation Administration did not elaborate on the latest setback, but sources familiar with the matter told Reuters that the flaw was discovered during a simulator test last week.

It was not yet clear if the issue could be addressed with a software upgrade or would require a more complex hardware fix.

“While we expect BA to eventually reinstate the MAX and return to targeted, normalized cash flows, we think the timeframe is unknowable,” Credit Suisse analyst Robert Spingarn said.

“For now, we think investors should expect continued volatility as BA and the regulators work behind closed doors to ferret out any additional issues.”

Up to Wednesday’s close, Boeing shares have lost about 11% of their value since the deadly crash of the Ethiopian Airline 737 MAX jet on March 10. This compares with a 6% increase in the S&P 500 index <.SPX> during the same period.

Yet Boeing’s stock trades at 20.1 times forward earnings, a slight premium to its European rival Airbus SE <AIR.PA>, which trades at 18.6 times.

(Reporting by Ankit Ajmera in Bengaluru; Editing by Sweta Singh)

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