Boeing (BA) stock fell on Monday in pre-market trade after the US-listed aircraft maker announced its decision to cut production of its 737 aircraft — sending shares of aerospace groups Meggitt, Melrose and Safran down as well.
Last week, Boeing announced its decision to cut its monthly 737 aircraft production by about 20% after two crashes, something that moved aviation authorities across the world to ground its fleet.
After Ethiopian Airlines jet crashed on March 10 that killed all 157 people onboard, deliveries of the Boeing 737 aircraft were frozen. In line with this, Boeing said it will cut production to 42 planes a month, from 52 starting sometime in April. The aircraft maker did not specify an end date, giving way to more speculation.
In the last week of March, just days after Chinese aviation firms grounded Boeing planes following the deadly crash, rival aircraft maker Airbus this week won a multibillion-dollar contract from the Asian country. China being its biggest market, the latest development is definitely bad news for Boeing. The $35-billion contract — for 290 A320-series and ten A350 planes that compete with the Boeing 737MAX — was signed when Chinese president Xi Jinping visited Paris. The order has been pending since the heads of the two countries first agreed on it during a meeting more than a year ago, though on a smaller scale at that time.
The shift in market share came at a time when Boeing is already facing headwinds from the ongoing trade war between Washington and Beijing. In the wake of the recent crashes involving Boeing aircraft, in Indonesia and Ethiopia, the odds of China switching to Airbus are very high. Realizing its bright prospects in the Asian market, Airbus is reportedly preparing to expand capacity at the Tianjin production facility.
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