Boeing plunged up to 12 percent late Thursday after having instructed one of its suppliers to pause development on additional 737 MAX components, according to a Spirit Aerosystems statement.
Spirit disclosed that it received a letter from Boeing to pause further work on four 737 MAX shipsets and stop production on 16 737 MAX shipsets for delivery this year.
Spirit predicts around 16 percent in decrease in its deliveries to the jet engine maker, adding that it does not yet have concrete details on what the size of the decrease would be but estimates it would be over 20 shipsets. A shipset is a collection of parts used to make one plane.
Boeing Co shares suffered a 12.2 percent drop during early morning sessions as the pullback accelerates into its third day. The implied fall in stock prices on Thursday would shave out about 166 points off Dow Jones Industrial Average price, while Dow Futures fell 897 points, or 3.3 percent.
The stock of the aerospace and defense giant had lost nearly 12 percent over the previous two sessions to snap a six-day winning streak in which the stock had risen 58 percent.
Spirit manufactures many 737 MAX jet fuselage, and this Boeing aircraft is Spirit's biggest plane project. Since mid-March 2019, the MAX - the newest single-aisle aircraft from Boeing - has been grounded worldwide following two deadly crashes within five months.
Boeing has been working on updates and hopes with global aviation authorities to start selling the plane again to customers by the end of the summer.
The Spirit news could threaten that timeline. Only recently, after a long pause, Boeing started producing MAX jets again, having halted output after its inventory of finished MAX jets climbed to about 450.
A resurgence in COVID-19 infections in certain US locations has added to jitters that airlines are facing a prolonged recovery that will make it difficult for Boeing to meet delivery targets for its 737 Max, a crucial source of cash.
Output fits and starts indicate that Boeing's client pledges are changing rapidly, Citi analyst Jon Raviv said. Airbus SE, the key competitor, faces planning issues as well. Raviv noted that this week the French company said that while it ruled out deeper cuts in jet production, plans could be subject to change and the matter will be revisited later in the month.
Meanwhile, Spirit Aerosystems announced that it will lay off certain staff and cut its hourly headcount at its Wichita, Kansas, hub because of the decline in production. The company's stocks were down as much as 15 percent to $26.08 during Thursday sessions.
