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Boeing shares drop after Boeing 737 production shutdown

Following Boeing´s announcement of plans to temporarily halt the production of the flawed 737 MAX aircraft, the aerospace company´s shares plummeted.

The Federal Aviation Administration (FAA) has had over 700 planes grounded around the world following two fatal crashes and last week the FAA confirmed that the plane would not return to service before 2020 resulting in Boeing´s decision to stop production from January.

Boeing originally believed that the planes would be back flying before the end of this year, however, US regulators made it clear that the grounded planes would not return to service that soon.

The planes were originally grounded in March 2019, just days after an Ethiopian Airlines Boeing 737 Max crashed in similar circumstances to a Lion Air jet the previous October; the combined tragedies totalling 346 lives.

During the past nine months, Boeing has been working to develop a fix for anti-stall software known as the Maneuvering Characteristics Augmentation System (MCAS) that forced the nose of the aircraft down despite the pilot´s efforts to override it in both fatal crashes.

According to a J.P. Morgan analysis, Boeing will still burn through over $1bn a month even after shutting down 737 Max production. Analyst Seth Seifman wrote to clients about how the company´s internal overhead and labour costs aren´t going anywhere and will increase cash burn.

The aerospace company is also expected to support its suppliers until the 737 Max is cleared for flight, a key expense it must endure to maintain future product capability. It said: “Safely returning the 737 Max to service is our top priority,” the aircraft manufacturer said.

“We know that the process of approving the 737 Max’s return to service, and of determining appropriate training requirements, must be extraordinarily thorough and robust, to ensure that our regulators, customers, and the flying public have confidence in the 737 Max updates.”