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Ryanair and TUI descend as Boeing suspends production of MAX aircraft

The aircraft maker will suspend production from January after US aviation regulators made it clear that the MAX will not be cleared to return to the skies before the end of the year as originally hoped

Boeing - Ryanair and TUI descend as Boeing suspends production of MAX aircraft

Shares in the LSE’s major listed airlines descended on Tuesday in the wake of the news that Boeing Co (NYSE:BA) will be suspending production of its 737 MAX aircraft following two fatal crashes.

In an announcement overnight the aeroplane maker said it will suspend production in January after US aviation regulators made it clear that the MAX will not be cleared to return to the skies before the end of the year as the company had originally hoped.

READ: TUI trims dividend policy as profits dip on Boeing MAX grounding

“We believe this decision [to suspend production] is least disruptive to maintaining long-term production system and supply chain health”, the company said in a statement, adding that going forward it will instead prioritise the delivery of the 400 MAX planes currently in storage.

The company also stressed that there would be no layoffs as a result of the stoppage.

Analysts at Jefferies, which rate Boeing at ‘buy’ with a price target of US$420, said that while the lack of a schedule for when the MAX could return to service created a “timing abyss”, the stoppage would conserve around half of the US$4.4bn in cash burn per quarter than they had previously forecast.

The broker also expected a relatively quick return to service next year, forecasting that deliveries of the MAX will resume in April, although the delay meant they expected Boeing to deliver 462 planes for its 2020 financial year as opposed to previous estimates of 807, a reduction of 43%.

Carriers and suppliers suffer losses

Aside from Boeing’s own woes, the prospect of a delay to deliveries of new planes next year sent shares in Ryanair Holdings PLC (LON:RYA) down 3.3% to €14 in early afternoon trading on Monday, while travel giant TUI AG (LON:TUI) fell 1.3% to 978p.

Ryanair has 135 MAX aircraft on order that have yet to be delivered, while TUI is awaiting 72 planes after having already received 15.

TUI blamed the grounding of the aircraft for a 28.4% decline in profits for its last full year, as well as for the decision to trim its dividend policy going forward.

Meanwhile, London-listed companies manufacturing components for the MAX were also on the way down.

Senior PLC (LON:SNR), whose aerospace unit counts Boeing as its largest customer, was down 9.2% at 169.1p, while Meggitt PLC (LON:MGGT), which supplies Boeing with multiple products including fire protection and flight displays, was 1.6% lower at 659.4p.

QinetiQ Group PLC (LON:QQ.), which tests Boeing’s designs as its wind tunnel in Hampshire, also dropped 1.1% to 350p.

Boeing’s shares were down 1.3% at US$322.50 in pre-market trading in New York on Tuesday.

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