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Boeing’s production pause will not end 737 Max cash burn: Analysts

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Boeing is expected to continue burning cash despite pausing production of its 737 MAX jet, as it will leave its workforce intact and likely provide support to suppliers, analysts said.

Some estimated the cash burn at around US$1 billion (S$1.35 billion) a month.

The airline said on Monday it would suspend production next month, its biggest assembly-line halt in more than 20 years, as repercussions from two deadly crashes of the now-grounded aircraft drag into next year.

Boeing, which builds the 737 south of Seattle, said it would not lay off any of the roughly 12,000 employees there during the production freeze.

"We estimate that Boeing is burning nearly US$2 billion per month on the MAX but this will not drop to zero during the halt," JPMorgan analysts said in a note to clients.

They assumed more than half of those costs will remain due to internal overhead and staff expenses as well as support for key suppliers like fuselage producer Spirit AeroSystems Holdings.


Analysts at Jefferies estimated a cash burn of more than US$730 million a month.

The US Federal Aviation Administration needs to certify software changes and training plans before the plane can resume flying in the US.

Other regulators then need to sign off for it to return in other parts of the world.

The duration of the production halt is uncertain, making it hard to forecast the financial impact on Boeing and its suppliers.

"We don't know what Boeing plans to do about its suppliers," said Mr Richard Aboulafia, vice-president of analysis at Teal Group.

"They might need them to stop component, systems, and structures deliveries, but it would still need to help these suppliers keep workers and capacity so they can go back to full output when the time comes."

Jefferies estimated the halt could last three months, which would reduce its 737 MAX delivery forecast for 2020 to 462 planes from 807.- REUTERS