Boeing may face billions more in losses as MAX crisis deepens

Boeing may have to book billions of dollars in additional charges related to its parked 737 MAX jets, brokerages said on Monday, citing fresh uncertainty over the time frame for lifting a safety ban imposed after deadly crashes.

Credit Suisse and UBS downgraded the stock after Reuters on Friday reported that a series of internal messages from a former Boeing pilot described the plane’s software as behaving erratically months before the jet entered service.

The new revelation plunged the world’s largest planemaker into a fresh crisis involving its flagship single-aisle aircraft, as the worldwide safety ban on the 737 MAX stretches into its eighth month.

Boeing booked a $5.6 billion pretax charge in the second quarter and in July had estimated the total cost of the MAX grounding to be more than $8 billion.

The crisis over the messages continued to consume Boeing on Monday, two days before the company reports quarterly financial results. Chief Executive Officer Dennis Muilenburg told all employees by email they should speak to managers if they have questions about their content.

Muilenburg began the email, sent on Sunday evening Seattle time, by saying Boeing continues to make “steady progress” toward returning the 737 MAX to commercial service.

The company was “deeply committed” to cooperating fully with regulators and investigators, he added.

Boeing’s shares fell as much as 5.7 percent to $324.40 in early trading on Monday, making the stock the biggest percentage loser on the Dow Jones Industrial Average. The stock has lost 18 percent of its value since the second deadly crash of the popular jet in March.

The planemaker has already cut production of the 737 to 42 aircraft monthly. It plans to increase output to a record level next near, though several industry sources say there is an increasing possibility the company may have to cut production if regulators further delay their approvals.

Reuters reported on Monday that European regulators expect to clear the 737 MAX to return to service in January at the earliest, later than Boeing’s estimate of the plane flying before year-end.

“We see increasing risk that the Federal Aviation Administration won’t follow through with a certification flight in November and lift the emergency grounding order in December,” UBS analyst Myles Walton said, downgrading the stock to “neutral” from “buy.”

Walton cut his target price on Boeing’s shares by $95 to $375, citing an increase in “likelihood of a pause on the 737 MAX production system” due to a delay in the jet’s return.

UBS also downgraded Boeing’s biggest supplier, Spirit AeroSystems, to “neutral” from “buy” and cut its target price on the stock to $88 from $92. (Reuters)