Boeing’s Halo Effect – Part 2

Two months ago, I talked Boeing’s suppliers suffering through the 737Max debacle as well,

Boeing’s Halo Effect

However, a derivative impact to the Boeing accidents will be to the Boeing suppliers.It takes more than 400 suppliers and more than 2 million parts to fabricate a Boeing 737 Max plane. If Boeing’s 737 Max 8 orders are revised downward, expect their suppliers to be adversely affected as well.

Spirit AeroSystems (SPR) is the largest supplier of aerostructures to Boeing and manufacturing aerostructures for every Boeing commercial aircraft currently in production, including the fuselages for the Boeing 737 Max 8. If Boeing has a hard landing, the chart suggests Spirit AeroSystems can go down to the weekly demand at $78.

Boeing’s accounted for 23 deliveries in April, Boeing’s lowest reported total for that month since 2006. Boeing is Spirit’s largest customer and which gets about 70% of the aerostructures, accounts for around half of Spirit’s annual sales.

In recent years, Spirit has added thousands employees to its workforce to meet the 737 demand, has taken a 180 and yesterday announced a voluntary retirement plan to some of its salaried workforce.

However, there is light at the end of the tunnel. Yesterday Boeing announced the completion of its updated software for the 737 MAX plane. The next step is for Boeing to work with the FAA and worldwide regulators, to test the software. If all goes well, the 737 MAX could be flying and and in production could increase within weeks.

Thus, the chart suggests that price may have found a level, the weekly demand at $78 that may hold moving forward.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

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