Boeing shares plunge over downgrade due to 737 Max production delays

Erika Holt
April 11, 2019

The plane maker on Friday said it would cut output to 42 airplanes a month by mid-April, as the company fights global criticism about the safety of its 737 MAX jets after two tragic crashes that ultimately led to a grounding of the aircraft.

Boeing faces its most significant reputational crisis in decades, stemming from two crashes of its 737 Max 8 jets, which killed 346 people in Indonesia and Ethiopia.

On Friday, the company cut its monthly 737 production by almost 20 percent, signaling it did not expect aviation authorities to allow the plane back in the air anytime soon. Never the less, the US-based low-priced carrier maker with a market capitalization of 101.1 billion did not reveal an end-date.

The Texas-based airline, that previously canceled some of its flights until the end of April 2019, said it would "contact affected customers directly by email or telephone" for rebooking.

"We are confused, frustrated and disappointed with the situation", said Merdian Agustin, whose husband was killed in the Lion Air crash.

While there are plenty of traditional 737 models in service, almost all of the new planes that Boeing is selling as part of the program are Max models.

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Families of 11 Lion Air victims said at a news conference organized by Jakarta law firm Kailimang & Ponto that they are joining dozens of other Indonesian families in filing lawsuits against Boeing. Another research proved that the Ethiopian airlines faced the fatal crash because a sensor erroneously triggered the anti- stall system; this system is named as the Maneuvering Characteristics Augmentation System (in short, MCAS). The event was to showcase the updated automated flight control system and the revised pilot training protocols.

Besides working on advancing and testing its software update, Muilenburg said the company is adjusting its production system temporarily to accommodate the "pause" in MAX deliveries.

In a new statement Friday, Muilenburg also said he has asked the company's board to establish a committee that will review the policies and processes Boeing uses to design and develop its airplanes. Boeing has been unable to deliver the finished planes to customers since early March, when regulators across the world ordered that they be grounded indefinitely.

Southwest Airlines, meanwhile, has one of the largest exposures to 737 MAX jets, and according to Raymond James analyst Savanthi Syth, service resumption may now take until the peak summer travel period.

We really do not know at this point.

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