Boeing 737 Max deliveries suspended in wake of U.S. grounding
Boeing confirmed Thursday it's pausing deliveries of 737 Max model planes to customers after the U.S. on Wednesday grounded all Boeing 737 Max jets, the model of aircraft involved in a deadly crash in Ethiopia.
The planemaker will continue to build the 737 models at its current rate, spokesman Chaz Bickers confirmed in an email to CBS MoneyWatch. Reuters first reported the delivery pause.
Boeing builds 52 aircraft a month of all models of the 737, the world's most popular aircraft. The company doesn't break down how many of the newer 737 Max versions come off the assembly lines along with the older design, known as the 737 NG, which the world's biggest planemaker still makes.
"We continue to build 737 MAX airplanes, while assessing how the situation, including potential capacity constraints, will impact our production system," Bickers said. "No change to our production rate at this time, but we continue to work through production decisions."
The fatal Ethoipia crash on Sunday followed a fatal crash in October of the same model plane from Indonesia's Lion Air. Updated software called MCAS, being developed for the 787 Max 8 system after questions stemming from the Lion Air crash, may be ready by May following testing by airlines and regulators, several analysts said in reports this week.
Boeing had planned to increase total 737 production to 57 per month this year as it works through an order book of more than 5,000 737 Max models to be delivered over more than seven years, according to investor presentations. It's still making older 737 NG versions and will continue to deliver them, Bickers said.
For Boeing, halting all 737 Max deliveries could cost it $5.1 billion, or roughly 5 percent of annual revenue, in just a two-month period, the Washington Post reported this week, citing analysts at Jefferies.
The company may also have to make "concessionary payments of some sort to maintain positive customer relations," UBS analyst Myles Walton Walton said in a research note predicting the paused deliveries. Norwegian Air, for instance, is seeking compensation for lost revenue from its grounded 737 Max planes.
Boeing stock fell another 1 percent Thursday to around $373 a share. The company has lost some $25 billion in market value since the Ethiopia Airlines crash last Sunday.
