(Reuters) -Boeing shares fell 4.1% on Tuesday and were set to extend last week’s losses as the U.S. grounding of some 737 MAX 9 jets entered its 11th day, while the company’s promise of further quality checks raised the specter of added costs.
The planemaker has been engulfed in a crisis since an Alaska Airlines MAX 9 jet made an emergency landing following a cabin panel blowout earlier this month, following which the U.S. Federal Aviation Administration (FAA) temporarily grounded 171 aircraft for safety checks.
Shares of beleaguered supplier Spirit AeroSystems, which made the fuselage for the affected jet, were also down 5.1% on Tuesday following last week’s 14.1% loss. U.S. markets were closed for the Martin Luther King Jr. holiday on Monday.
The FAA said on Friday it will audit the MAX 9 production line and suppliers, and consider having an independent entity take over from Boeing certain aspects of certifying the safety of new aircraft that the regulator previously assigned to the planemaker.
“With FAA taking a closer look into Boeing’s production, we think the risk of production/delivery impact increases significantly,” Wells Fargo analyst Matthew Akers said, as he cut his rating on the planemaker’s shares to “equal weight” from “overweight”.
“Given Boeing’s recent track record, and greater incentive for FAA to find problems, we think the odds of a clean audit are low.”
Before Akers’ downgrade, 25 analysts had a “buy” or higher rating, while six had a “hold” rating, according to LSEG data. No analysts have recommended investors to sell Boeing shares.
Under intensifying pressure from airlines and the FAA following a series of MAX-related quality issues, Boeing said on Monday it will add further quality inspections for its best-selling jet series and deploy a team to Spirit AeroSystems to check the supplier’s work on the door plug involved in the accident.
“All of this is likely to lead to higher costs over time. And while it’s not clear how much at this point, it doesn’t seem unreasonable to think that an extra 1,000 inspectors might add $250 million in annual costs,” Citi analyst Jason Gursky said.
(Reporting by Abhijith Ganapavaram in Bengaluru; Editing by Shounak Dasgupta)
