Boeing (NYSE: BA) has been hard hit by the ongoing 737 MAX fiasco. After a couple of its jets crashed, the company ended up grounding all of its 737 MAX’s as investigations were conducted to find out the cause of these disasters. Since then, further developments have emerged, including stories about how Boeing used inexperienced software engineers on the project. A new development has emerged, with rumors circulating over this weekend that Boeing’s management might consider halting all production of the 737 MAX until further notice.
The Wall Street Journal went on to report that Boeing is close to announcing its decision on whether to cut or even outright halt 737 MAX production. The company has consistently warned shareholders that it could end up halting production altogether, especially if flight bans continue to last longer than expected. A formal decision is expected to take place sometime this week, possibly as early as Monday itself.
Back in April, Boeing already cut 737 MAX production down by 20%, from 52 planes per month to 42 plants per month. The company has since confirmed last week that regulators aren’t planned to lift the ban anytime this year and will likely last well into 2020 if not longer. All of this is becoming quite expensive for the airplane producer, with the 737 MAX’s grounding costing the company an extra $5 billion in the second quarter.
Although no layoffs are planned anytime soon, some wonder whether Boeing will resort to these measures to help save costs. At the same time, the company also has a backlog of over 4,500 orders for the plane, which would take the company almost 10 years to complete at its current rate of production. As such, its understandably why investors have been hesitant about the company’s future prospects.
Shares of Boeing are down around 2 percent in after-hours trading, and it’s likely that they will tumble a little bit more once Monday’s markets open. Over the past six months, shares of the airplane manufacturer have fluctuated significantly but have stayed around the $350 price point. So far, the majority of analysts covering the stock have a cautious, neutral take on Boeing. Out of the 23 or so Wall Street experts that have issued their recommendations, 12 have a “neutral” rating, while another 11 have various “buy” ratings. Time will tell how the airplane giant fairs, but it is clear that this MAX 737 fiasco isn’t going to disappear anytime soon.
Boeing Company Profile
Boeing is the world’s largest aerospace and defense firm. With headquarters in Chicago, the firm operates in four segments, commercial airplanes, defense, space & security, global services, and Boeing capital. Boeing’s commercial airplanes segment produces about 60% of sales and two-thirds of operating profit, and it competes with Airbus in the production of aircraft ranging from 130 seats upwards. Boeing’s defense, space & security segment competes with Lockheed, Northrop, and several other firms to create military aircraft and weaponry. The defense segment produces about 25% of sales and 13% of operating profit, respectively. Boeing’s global services segment provides aftermarket servicing to commercial and military aircraft and produces about 15% of sales and 21% of operating profit. – Warrior Trading News
