Boeing Co. said it’s continuing to investigate quality issues affecting its 737 Max aircraft, after a report on new inspections tied to a recent production flaw sent the shares lower on Friday.
(Bloomberg) — Boeing Co. said it’s continuing to investigate quality issues affecting its 737 Max aircraft, after a report on new inspections tied to a recent production flaw sent the shares lower on Friday.
Inspections of some Max 8 models will now include hand-drilled holes on a component that helps maintain aircraft cabin pressure, The Air Current reported earlier. A quality probe tied to the production flaw is ongoing, Boeing said in an email.
The US planemaker fell the most intraday in seven weeks after the outlet reported on the expanded scope of the work. Spirit AeroSystems Holdings Inc., which supplies the faulty assemblies, dropped the most in almost a month.
The widening checks and potential rework suggest it will take longer than expected to correct the issue — raising new uncertainties around Boeing’s fourth quarter deliveries and financial prospects ahead of its earnings report later this month. Ryanair Holdings Plc, a major 737 Max customer, told Bloomberg on Thursday that Max delivery delays have worsened.
“The new issue will cause additional disruption to BA’s 737 deliveries, which likely will result in further delays for a month or so,” TD Cowen analyst Cai von Rumohr said in a research note.
This “could jeopardize” Boeing’s delivery target of at least 400 737s this year, and hurt fourth-quarter cash flow, von Rumohr said, “However, it shouldn’t jeopardize BA’s planned ramp in 737 production,” he said, referrring to Boeing’s stock ticker.
Boeing shares declined 2.8% as of 12:09 p.m. in New York, after falling as much as 4.3%. Spirit, which dropped as much as 4.6%, was down 0.5%.
Executives of the two companies said in September that the improperly drilled holes in the aft pressure bulkhead involved relatively easy repairs but were time-consuming. At the time, the companies were using X-rays to inspect about half of the 1,000 holes drilled on the component.
Previous inpsections tied to laser-guided assemblies have been expanded to include work done by hand, The Air Current said.
“We continue to take the time necessary to ensure each airplane meets our standards and regulatory requirements prior to ticketing and delivery,” Boeing said in an emailed statement.
Spirit said separately that it continues to work with Boeing to address required rework.
Fixes to the aft pressure bulkhead appear to be more challenging, Ryanair Chief Executive Officer Michael O’Leary told Bloomberg at an event in Brussels on Thursday. He said he no longer expected to receive 57 aircraft by the end of June, cutting into the airline’s flying capacity next summer.
Boeing notified the Federal Aviation Administration of its initial findings this week, along with customers already facing delivery delays of the Max 8 jets, according to The Air Current report.
The quality lapses are disrupting deliveries as Boeing works to ramp up production of the Max, potentially risking friction with more customers. The 737 is the largest moneymaker for Boeing as well as for Spirit, whose CEO stepped down this month.
Each 737 Max delivery adds about $10 million to the company’s free cash flow, estimates Jefferies Inc., and steadily rising output of the workhorse jet is critical if Boeing is to reach its target of producing $10 billion in cash by 2025 or 2026.
(Retops with details of 737 inspections, analyst comment)
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