Southwest stock downgraded to 'market perform' over Boeing's 737 Max jet
div > div.group > p:first-child"> Boeing announced late Friday plans to cut production of the jet, which has been grounded following the March 10 crash of Ethiopian Airlines flight 302 that killed all 157 people on board. It was the second fatal crash of the popular aircraft in less than five months and investigators suspect faulty data feeding into the aircraft's automated flight system played a major role in both accidents.
Southwest has 34 Max jets out of its fleet of about 750 aircraft, accounting for roughly 4 percent of its passenger capacity. American Airlines said it's extending cancellations of 90 daily flights involving the 737 jet by more than a month to June 5. "The reputational loss from these events could erode long-term market share and pricing power of the 737 MAX," BofA analyst Ronald Epstein said in a note to clients."A six-month delay also means lower margins due to penalties owed to customers, weaker negotiating position with airlines as airlines consider cancellations, and operational inefficiencies from the production disruption.
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